The Woodhouse Report: Relegated to the Archives?
Edward J. Lemons *
The Woodhouse Report was one of the greatest documents ever produced
in the world for the breadth and liberality of its understanding… But
the Report no longer has international standing except as an item for the
archives because it has been bandied about among committees to see how
it can be watered down enough to be acceptable to the people we elect
to Parliament. – Statement by Dr. W.B. Sutch, The Evening Post, March
11, 1972.**
Introduction
When the Report of the Royal Commission of Inquiry into Com-
pensation for Personal Injury in New Zealand was published late
in 1967 it initially aroused very little public interest.’ The Report
has since then, however, been widely recognised as a document
showing extraordinary insight and compassion in regard to the social
ramifications of accidental injuries. When one reads the document it
becomes clear that it is far more than simply a report on the acci-
dent problem. It is instead a detailed plan of action for meeting the
myriad problems created by reliance on the present hit-and-miss
disparate techniques for compensating losses due to accidental
injuries.
The Royal Commission was established to examine the workers’
compensation scheme but found it “essential to examine the social
implications of all hazards which face the work force, whether at
work or during the remaining hours of the day”2 In its Report the
Commission posited five basic principles upon which its recom-
mendations were based: Community Responsibility, Comprehensive
Entitlement, Complete Rehabilitation, Real Compensation and Ad-
ministrative Efficiency. After an examination of those principles, the
* B.BA., J.D. (Iowa); Lecturer in Law, Victoria University of Wellington.
* Dr. Sutch is a well-known commentator on the educational, political and
economic affairs of New Zealand, and is the author of, inter alia, The Quest for
Security in New Zealand 1840-1866, (1966).
1 For an explanation of this, see: Palmer, Abolishing the Personal Injury Tort
System: The New Zealand Experience, (1971) 9 Alta. L. R. 169, at pp. 196-97.
2 Report of the Royal Commission of Inquiry, Compensation for Personal
Injury in New Zealand, (1967), at para. 34. [Hereinafter referred to as the
“Woodhouse Report”].
McGILL LAW JOURNAL
[Vol. 19, No. 2
Royal Commission recommended abolition of the existing structure
for compensating injuries. In place of the old system would be sub-
stituted what has come to be known as the Woodhouse Plan –
a
comprehensive unified scheme for compensating injury regardless
of where it occurred or who was at fault. This scheme would be
operated by an independent administrative authority that would have
wide responsibilities in the fields of accident prevention and reha-
bilitation.
Despite the obvious comprehensiveness of the Report, the road
between it and legislation was to be a long one indeed. The Report
was followed by almost five years of debate and delay with a White
Paper and a Parliamentary Select Committee Report as the focal
points in the process. The White Paper was commissioned by the
National Party Government then in power. Published in October,
1969, the White Paper examined critically the Woodhouse Plan, with
particular emphasis on its estimated cost, and suggested alternative
approaches where it thought necessary.3 The Select Committee sat
for several months in 1970 and heard submissions from numerous
interested groups and individuals. Its Report,4 issued in November,
1970, recommended several significant changes in the Woodhouse
Plan and served as the blueprint for the Accident Compensation Act.
In December, 1971, near the end of the 1971 Parliamentary session
legislation was at last introduced. Even then, however, there were
many matters of detail still to be dealt with before the legislation
could be passed. Various committees continued over the Parliamen-
tary recess and into the next Parliamentary session to work on these
details. The Select Committee in charge of the Bill, after hearing
many submissions, finally reported to Parliament on September 19,
1972. On October 20, 1972, the Accident Compensation Act 1972 r was
at last passed by Parliament.
This short history of the W6odhouse Plan is recorded for the
reader only to illustrate that the matters contained in the Royal
Commission Report have indeed received the attention of numerous
committees. Does this process support the pessimism of Dr. Sutch?
It might be argued that this “bandying about” is simply a necessary
part of the democratic process as we know it, and in no way inhe-
3 Personal Injury – A Commentary on the Report of the Royal Commission
of Inquiry into Compensation for Personal Injury in New Zealand, (1969).
[Hereinafter referred to as the “White Paper”].
4 Report of Select Committee on Compensation for Personal Injury in New
Zealand, (1970). [Hereinafter referred to as the “Select Committee Report”].
5 Accident Compensation Act 1972, No. 43. [Hereinafter referred to as the
“Act”].
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THE WOODHOUSE REPORT
rently bad. It is only bad if it produces an unsatisfactory result.
The more important question, therefore, is whether the Woodhouse
Plan has been “watered down enough to make it acceptable to the
people we elect to Parliament”.
It is the purpose of this article to examine the basic provisions
of the Accident Compensation Act 1972 and to compare them with
the basic tenets of the Woodhouse Plan.6 In doing this an attempt
will be made to evaluate the extent to which the Woodhouse Plan
has survived in the Act.
I. – Comprehensive Entitlement Through Community
Responsibility
The Woodhouse Plan was, to borrow two of its basic principles,
a scheme designed to provide comprehensive entitlement to benefits
from a sound base of community responsibility, The two principles
were inextricably linked in one cohesive compensation scheme. It is
then perhaps fair to presume that any legislation purported to be
based upon the Woodhouse Plan which appeared to separate and/or
dilute these two basic principles would necessarily be suspect. Before
this, evaluation can be attempted, one must be clear about the
meaning attached by the Commission to community responsibility
and comprehensive entitlement, respectively.
a. Community Responsibility
It was a fundamental tenet of the Woodhouse Plan that losses
from personal injuries were a responsibility to be borne by the com-
munity. The Commission supported this tenet with two arguments –
one based in morality and the other in materialismY There is, on the
one hand, a moral duty on the part of the community to compensate
victims of accidents resulting from activities which injure a predic-
table number of people each year. An obvious example of such an
activity is automobile driving. But the community also has, on the
other hand, an economic stake in dealing with the accident problem.
This argument, in turn, is of two facets. Firstly, the community
accepts the fruits of production from its members and so should
also accept the burden of their losses from accidental injury. Second-
ly, the sooner injured people are rehabilitated the sooner they
6 The Royal Commission recognized that an adequate response to the acci-
dent problem demanded effective accident prevention. Woodhouse Report, at
paras. 2, 3, and 306-353. This is obviously an important area, but one which
will not be examined in this article.
7 Woodhouse Report, at para. 5.
McGILL LAW JOURNAL
[Vol. 19, No. 2
become productive members of society again. In this, said the Com-
mission, the community has a vested interest.
In view of the central importance of the community responsibility
principle one might well have expected the Commission to advise
that the scheme be financed out of general taxation funds. This is
not, however, the case. Instead the scheme was to be funded on a
more limited social insurance basis. Annual levies were to be made
on the following community groups: employers, self-employed per-
sons, owners of motor vehicles and drivers of motor vehicles. Addi-
tional funds would accrue from self-insured employers and Health
Department funding of medical costs. According to the Commission’s
estimates, the cost of the new comprehensive scheme would not
differ greatly from the total cost of the present disparate approaches
to the problem. If, however, additional funds were required they
were to come from general taxation.”
The question which obviously arises in view of this method of
financing the scheme is whether the Royal Commission itself was
faithful to its principle of community responsibility. This question
was anticipated in the Report and an answer offered.” The Com-
mission observed that industry had already built the cost of two
compulsory insurance schemes – workers’ compensation and third
party motor vehicle cover –
into their products. The community
was, therefore, already indirectly sharing this cost. The Commis-
sion saw little merit in shifting this cost from industry and placing
it more squarely on the taxpayer. The Commission, therefore, saw
its principle of community responsibility as being fulfilled by its
proposed financing arrangements. The adequacy of this answer
ought, perhaps, to be questioned. Is a scheme which puts the primary
financial burden on one segment of the community and relies on
that segment to pass the costs on to the other segments really based
directly in community responsibility? Does the Commission’s ap-
proach place too much faith in the theory of general deterrence
expounded by Professor Calabresi? 10 Is the result of this scheme
that poorer people – who pay a larger percentage of their income
sIbid., at para. 481.
9 Ibid., at paras. 462-463.
10 G. Galabresi, The Costs of Accidents, (Yale University Press, New Haven:
1970). The “Calabresi theory”, developed in a series of law review articles and
consolidated in his book, has generated considerable response. See, e.g., P.S.
Atiyah, Accidents, Compensation and the Law, (Weidenfeld and Nicholson,
London: 1970), at pp. 565-600; Blum and Kalven, The Empty Cabinet of Dr.
Calabresi – Auto Accidents and General Deterrence, (1967) 34 U. Chi. L. Rev.
239.
19731
THE WOODHOUSE REPORT
for manufactured goods –
are hit hardest by this “passing on”?”
The White Paper did not address itself to these questions. Rather,
it was “assumed for purposes of this Paper that the compensation
scheme should be funded from its own levies.’12 It was observed
that “the Commission’s recommendation has the added virtue of
being relatively straightforward and presumably more acceptable
than a proposal which calls for.the costs to be met entirely from
general taxation.”‘ 3 In that statement are contained two reasons
for favouring the Commission’s version of community responsibility
one is administrative and the other is political. They are perhaps
–
sounder reasons than the one of principle offered by the Commission.
In any case, this question is certainly one which deserves further
examination and analysis elsewhere.’ 4
b. Comprehensive Entitlement
The base of community responsibility was intended to support
a scheme of comprehensive entitlement to benefits. The principle
of comprehensive entitlement involves an analysis of two ‘basic
issues: First, which injuries, if not all, should receive compefisa-
tion and other benefits offered by the scheme; and second, which
groups in the community, if not the whole, should be eligible to
receive the compensation and other benefits?
The Commission attacked the group of unco-ordinated remedies ‘5
existing at that time, almost entirely on the basis of principle. This
“For an analysis of some of the problems involved in relying on “passing
on”, see: Calabresi, Some Thoughts on Risk Distribution and the Law of Torts,
(1961) 70 Yale LJ. 499, at pp. 517-27.
12 White Paper, at para. 202.
‘3 Ibid., at para. 201.
14 For proposals which attempt to combine some measure of general deter-
rence with a more substantial reliance on general taxation funds than the
Royal Commission proposed, see: T. Ison, The Forensic A _ottery, (Staples,
London: 1967); Franklin, Replacing the Negligence Lottery: Compensation and
Selective Reimbursement, (1967) 53 Va. L. Rev. 774.
15The compensation system existing when the Commission sat was as
follows. There were two compulsory insurance schemes – Workers’ Com-
pensation and third party liability insurance for motor vehicle accidents. An
injury received by a worker in the course of his employment was compensated
under worker’s compensation. If the worker could show his employer to have
been personally or vicariously negligent then an action for damages would lie.
Worker’s compensation did not, however, cover employers or the self-em-
ployed. An injury received in a motor vehicle accident could be the subject
of a common law action for damages based upon negligence. A successful
plaintiff could, however, have his damages reduced due to contributory negli-
gence. The two compulsory schemes were supplemented, and at times dupli-
cated, by a social security scheme offering less than generous benefits.
McGILL LAW JOURNAL
[Vol. 19, No. 2
was due to the small amount of statistical information available
concerning the operation of the system.16 The Commission was able,
however, to draw upon empirical data from other countries. After
discussing a number of matters concerning the existing remedies,
the Commission concluded that the disadvantages of the process
clearly outweighed the advantages both from the individual and
community perspectives.7 Because this topic has been so well can-
vassed elsewhere,’ 8 there is need to say very little about it here.
The Commission decided that for their scheme “[i]njury, not cause,
is the issue” 9 An injury is no less a loss to the individual and
the community when it occurs without identifiable blameworthy
conduct; or when it occurs outside working hours.
Having decided that injuries should not be differently treated
depending upon cause, the Commission had then to decide whether
different treatment could be justified depending upon the segment
of the community to which the injured person belongs. If the argu-
ments upon which its general principles were based were sound
then the answer was, in the Commission’s view, obviously not.20
Included in the scheme, therefore, were earners, self-employed
persons, and housewives. In addition, the elderly were provided
for by having no upper age limit on the eligibility for benefits.
Finally, the Commission was concerned to cover young people in
a way that recognised their potential contribution to the commu-
nity. It is in this area that the Commission failed to live up to
its principle of comprehensive entitlement in as meaningful a way
as it might have done. A lower age limit of 18 years of age was
16See: Palmer, op. cit., at p. 185.
1’Woodhouse Report, at para. 171.
‘sSee: P.S. Atiyah, op. cit., at pp. 445-77; State of New York Insurance
Department, Automobile Insurance… For Whose Benefit?, (1970), at pp.
17-55; T. Ison, op. cit., at pp. 7-30; R. Keeton and J. O’Connell, Basic Protection
for the Traffic Victim, (Little Brown, Boston: 1965), at pp. 1-5; Ehrenzweig,
A Psychoanalysis of Negligence, (1953) 47 Nw. U. L. Rev. 855. In addition, see
the following empirical studies: U.S. Department of Transportation, Auto-
mobile Insurance and Compensation Study: Economic Consequences of Auto-
mobile Accident Injuries, (1970); Conard, Morgan, Pratt, Voltz and Bombaugh,
Automobile Accident Costs and Payments, (University of Michigan Press, Ann
Arbor: 1964); Franklin, Chanin and Mark, Accidents, Money and the Law,
(1961) 61 Colum. L. Rev. 1.
19 Woodhouse Report, at para. 6. The Woodhouse Report chose to exclude
sickness from the proposed scheme, except for industrial diseases. It did so
rather more on the basis of prudence than of logic. For a scheme that would
go beyond Woodhouse and include disability due to non-industrial sickness,
see: T. Ison, The Forensic Lottery, (Staples, London: 1967).
20Woodhouse Report, at para. 282.
1973]
THE WOODHOUSE REPORT
recommended 21 and the provisions for taking account of potential
earning capacity were sketchy indeed. More will be said on this
point when discussing the legislation. It should suffice for now
to say that young people, and especially students, were given con-
siderably less attention than were other segments of the commu-
nity.
Comprehensive entitlement thus meant that all segments of
the community were to be covered in respect of any injury by
accident regardless of cause. In the words of the Woodhouse Re-
port, the scheme should:
… provide immediate compensation without proof of fault for every
injured person, regardless of his or her fault, and whether the accident
occurred in the factory, on the highway or in the home… 2 2
As explained earlier, this was to be done from a sound financial
framework based in community responsibility.
Now that the somewhat pedestrian, but necessary, task of
describing the content of the Woodhouse Plan principles of com-
munity responsibility and comprehensive entitlement has been at-
tempted, let us examine the Accident Compensation Act to see to
what extent these two principles are manifested in it. Where there
appear to be alterations in the Woodhouse Plan, they will be
analysed.
c. The Act
The Governmental White Paper on the Woodhouse Plan sug-
gested various alternative ways of dealing with some of the weak
points of the scheme but in general seemed to be in agreement
with the scheme’s basic principles.2 The Parliamentary Select Com-
mittee, however, was guided by what it viewed as more pragmatic
considerations. After stating the various social problems with which
the Woodhouse Report was concerned –
e.g., compensation, re-
habilitation, accident prevention –
the Select Committee observed
that:
… community responsibility requires simply that the social needs be
met: it does not stipulate how they should be met… We prefer to
consider pragmatically how best to effect improvements …
4
21 Ibid., at para. 283(d).
22 Ibid., at para. 18.
23 It should be borne in mind that “the White Paper sought to demonstrate
the feasibility of the Commission’s scheme from a neutral standpoint”: Palmer,
op. cit., at p. 203.
24Select Committee Report, at para. 7.
McGILL LAW JOURNAL
[Vol. 19, No. 2
The Select Committee was, in short, concerned to put forward
“recommendations aimed at getting practical reforms introduced
quickly”.2 5 In pursuit of this goal the Committee recommended two
independent, but co-ordinated compensation schemes –
one to
cover earners (employers, employees and self-employed persons)
and the other to cover all persons injured in motor vehicle acci-
dents. These two schemes were to be separately financed on a
user-pays basis through levies on employers and motor vehicle
owners. Housewives and other non-earners were excluded from
the schemes to the extent that their injuries did not result from
motor vehicle accidents. The Committee seemed anxious to avoid
any aura of social security emanating from their schemes and,
therefore, recommended that in no event should general taxation
monies be used.
The Accident Compensation Act follows the Select Committee
model very closely in the responsibility and entitlement areas. The
Act adopts the dual scheme approach and establishes an Earners’
Scheme and a Motor Vehicle Accident scheme.
The earners’ scheme offers two kinds of cover to the work
continuous cover and work accident cover.20 Continuous
force –
cover entitles an injured earner to compensation and rehabilitative
assistance on an around-the-clock basis, regardless of whether the
injury arises out of and in the course of the earner’s employ-
ment. 7 An earner will be eligible for continuous cover if he or
she has been ordinarily resident in New Zealand for twelve months
at sometime prior to the accident. If the earner is an employee
he must be employed for a minimum of ten hours per week and
entitled to earnings of at least $500 per year, or have worked for
at least 160 hours during the eight weeks immediately prior to
the accident. If the earner is self-employed, on the other hand, he
will receive continuous cover if he is found to be “carrying on a
business”. 28 This decision will be made on the basis of the defini-
tion given that phrase in the Land and Income Tax Act 1954.29 This
provision allows a self-employed person to be covered even if his
business is running at a temporary loss.
Work accident cover provides cover only for those injuries which
arise out of and in the course of the earner’s employment. 0 Origi-
25 Ibid., at para. 8.
26Act, at section 55. Also covered, under special provisions, are members of
the armed forces: Act, at sections 31(d), 61, 63 and 70.
27 Ibid., at section 56(a).
28 Ibid., at section 57.
29Ibid., at section 2(1).
30 Ibid., at section 56(b).
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THE WOODHOUSE REPORT
nally the legislation provided that a self-employed earner who did
not have continuous cover had to make special application for work
accident cover. This undesirable administrative step, however, has
been eliminated from the Act.31 Work accident cover now applies
alike to employees and self-employed earners who do not have
continuous cover.
The motor vehicle accident scheme is much less restrictive
than the earners’ scheme. Everyone injured in an accident in-
volving a motor vehicle will be covered by the scheme, regardless
of fault. Vehicles included in the scheme are those licensed or
required by law to be licensed, those holding a trade license, and
those specified by the Act as entitled to be treated as though they
were licensed motor vehicles. 2 Entitlement under the motor vehi-
cle scheme is thus very broad and comparatively uncomplicated.
1. Who is Not Entitled?
Who has been left out of the schemes established by the Act?
It should perhaps be recalled that the Woodhouse Plan called for
“24 hour insurance for every member of the work force, and for
the housewives who sustain them”.3
In the first place, it is clear that although the earners’ scheme
will cover a reasonably large proportion of the work force, the
scheme certainly falls short of “24 hour insurance for every mem-
ber of the work force”. For those earners who do not meet the
criteria for continuous cover the old workers’ compensation dilem-
ma of “out of and in the course of employment” remains.34 If they
are unfortunate enough to be injured while not in employment
they are left to their own devices, among which must admittedly
be included the availability of meager social security benefits. For
those who can pursue a negligence action the situation may not
be so desperate. Indeed, they may welcome the opportunity to pur-
sue the common law’s “pot of gold”. Even so it is not easy to
understand why the deficiencies of the common law negligence
action, which led to its partial abolition, should not logically lead
31Ibid., at section 58(4).
32 Ibid., at sections 92-96.
33 Woodhouse Report, at para. 18.
34 The cumbersome distinction between continuous and work accident cover
necessitated the grafting of a whole group of sections from the old Workers’
Compensation Act onto the new Act. See: Act, at sections 84-89.
McGILL LAW JOURNAL
[Vol. 19, No. 2
to its total abolition 5 Finally, for those injured outside the course
of their employment who cannot successfully pursue a negligence
action, the situation is indeed bleak.
Housewives and other non-earners are covered by the Act only
if their injury arises out of a motor vehicle accident. Since the
majority of New Zealand women are housewives, a substantial seg-
ment of the population has not been included in the Act. Because
they contribute substantially to the economic productivity of the
country injuries incurred by them are injuries incurred at least
indirectly by the economic structure of the country. Why, with
the exception of motor vehicle accidents, were they excluded from
the Act? The Select Committee suggested that they, and other non-
earners, be excluded because otherwise costs would be too difficult
to control 0 There is little doubt that this is why they were ex-
cluded from the legislation as well. In the words of a prominent
member of the National Government, in power when the Act was
passed, the Government was faced with “a choice between two
basic principles of the original proposals –
either (a) comprehen-
sive entitlement, or (b) real compensation”. 7 One may well be
entitled to wonder why if the Woodhouse Commission’s costing of
its scheme was correct, both comprehensive entitlement and real
compensation could not have been offered. Perhaps the reason
for exclusion goes beyond mere financial considerations. Certainly,
the exclusion was made easier for the Government by the relative
lack of political power possessed by housewives, and other non-
earners, as a group. In addition, active proponents of “women’s
lib” might suspect that the reason lies deeper in the male psyche.
The Government attempted to soothe its critics on this point
by explaining that as time passed and the scheme “got on its feet”
the excluded groups could probably be brought into the fold. Each
year a substantial portion of the income under the scheme would
be invested. Over a period of time reserves would be built up and
35 It is interesting to note that the New Zealand Law Society urged that the
common law action for damages for personal injury be totally abolished. It
noted in its evidence before the second Select Committee that:
The lingering death contemplated for [the common law action] under the
Bill, in the society’s view, will be productive of uncertainty unfair dis-
crimination and injustice: New Zealand Parliamentary Debates, (1972), at
p. 2986.
There is no doubt that the incredible complexity of the Act is at least in part
due to failure to totally abolish the common law action for damages in this
area.
26 Select Committee Report, at para. 35.
37New Zealand Parliamentary Debates, (1972), at p. 3006.
1973]
THE WOODHOUSE REPORT
these could be used to finance the inclusion of new groups. The
Government went further and included in the Act what has come
to be known as the “conscience clause”.38 This clause requires the
Commission operating the schemes to consider “the desirability,
feasibility and cost of extending the scope of cover under this Act”.
The Commission is to do this after the schemes have been oper-
ating for at least three years, and they have up to six years to do
it. On that basis it could be as late as 1980 before any change was
made. Although the clause may in a loose sense be called a “con-
science clause” it is quite clear that the National Government was
not giving too free a reign to its collective conscience.
2. Who is Responsible?
Responsibility for the entitlement offered by the Act is based
on what looks very much like a user-pays system. The two schemes
are to be independently self-financing, with no reliance at all on
general taxation funds.
The Woodhouse Plan was to be financed by a flat rate levy of
1 percent of earnings. 9 -Although it has been made clear that the
Act aims for an average differential levy of 1 percent, the Govern-
ment apparently was of the view that it was desirable to attempt
to internalise accident costs by varying the levy depending upon
the risk involved in the particular employment activity. The ear-
ners’ scheme, therefore, is to be financed by a differential levy
ranging between .25 percent and 5 percent. The levies are to be
paid by an employer in respect of the earnings of his employees
and by self-employed persons up to a ceiling of $10,400.40 In addi-
tion to the normal differential levy, the Commission is to have
the power to impose penalty levies on employers whose accident
records are significantly worse than average for their classification
and to grant rebate levies to employers whose accident records are
significantly better than average.
The motor vehicle scheme is at first to be financed by annual
levies payable by owners of motor vehicles. This may be supple-
mented, however, by levies on drivers of motor vehicles. For this
purpose, drivers may be classified to facilitate the imposition of
38 Act, at section 18.
39 Woodhouse Report, at para. 500.
40Less than 1% of New Zealand earners have incomes in excess of $10,400.
See: Palmer and Lemons, Beyond Keeton-O’Connell: New Zealand’s New Com-
pensation Scheme, Table 1 (compiled from various statistical data contained
in New Zealand Official Yearbook, (1971)), scheduled for publication in [1972]
Ill. L. F., Number 4.
McGILL LAW JOURNAL
[Vol. 19, No. 2
differential levies, and also penalty levies on drivers with poor
driving records.
3. Evaluation
The financial responsibility for the two schemes established
by the Act is, it can be seen, to be borne basically by those who
directly are entitled to receive benefits under them. Perhaps the
most charitable thing one can say is that the principles of com-
munity responsibility and comprehensive entitlement find new
definition in the Act. To proponents of the Woodhouse Plan’s
comprehensive approach the new definition seems restrictive in-
deed. Before making a judgment on the Act as a whole we should
examine the extent to which the other three basic principles of
the Woodhouse Plan have survived. Earlier in this article, how-
ever, it was proposed that any legislation purportedly based on
the Woodhouse Plan which appeared to give less than full effect
to the basic principles of community responsibility and compre-
hensive entitlement would be suspect. It is, I think, fair to say
at this stage that the Accident Compensation Act is well into that
category.
II. Administrative Efficiency
It is essential that a compensation scheme having the compass
of the Woodhouse Plan be administered in an efficient and en-
lightened manner consistent with the underlying philosophy of the
scheme. The Woodhouse Plan, therefore, has administrative efficiency
as one of its basic principles. This principle contains three primary
aspects:
1. high degree of administrative centralisation;
2. exclusion of private enterprise; and
3. absence of adversary techniques in the decision-making pro-
cess.
a. Centralisation
The Commission’s attachment to the idea of centralising the
administration of its scheme stemmed primarily from its study of
the administrative methods used in the Ontario Workmen’s Com-
pensation system. The Commission recommended that the Ontario
system be used as a general model for the New Zealand scheme.4 1
The thing which seemed most to attract the Commission to centra-
41 Woodhouse Report, at para. 307(h).
1973]
THE WOODHOUSE REPORT
lisation was the very low cost of administration in Ontario compared
to the existing New Zealand compulsory insurance schemes 2
The Commission, therefore, recommended a centralised adminis-
trative structure organised around an independent Board of Com-
missioners. The Board was to consist of three members and chaired
by a lawyer of seven years practical experience. Although independent
in function, the Board was to be attached to the Department of
Social Security for administrative purposes4 The administrative
hierarchy proposed by the Commission was virtually identical to the
Ontario one, except that on matters of law an appeal could be taken
to the Supreme Court. The structure proposed, therefore, is this:4
Supreme Court
(on matters of law only)
Board of Commissioners
I
I
Appeal Tribunal
I
Review Committee
I
(consisting of three members including
a doctor and a lawyer)
(consisting of various specialised
employees of the Board)
Administrative Inquiry and Assessment
b. Private Enterprise
The decision to exclude private enterprise, specifically the insur-
ance companies, from this administrative hierarchy seems to have
been based partly in principle and partly in considerations of cost.
In principle, the Commission would have excluded insurance com-
panies from the scheme on the grounds that:
In the absence of personal liability and with the disappearance of any
element of voluntary contribution there can be no place for insurance
companies. Their purpose is to seek business from individuals who might
wish to cover themselves at their own choice in respect of personal con-
tingencies of their own definition. 45
Private enterprise competition and profit orientation, therefore, was
incompatible with the compulsory loss-sharing which characterised
the Woodhouse Plan.
42 Ibid., at paras. 213-214. See the discussion of this point, infra, nn. 46-47.
43 Ibid., at para. 495.
44 Under the proposed procedures, no hearing would be held until the Appeal
Tribunal stage. Both of the first two stages would be conducted on the basis
of informal investigation and inquiry based upon written report forms from
doctors, employers and claimants: Ibid., at para. 308. See also: White Paper,
at paras. 291-299.
45 Woodhouse Report, at para. 280(d).
McGILL LAW JOURNAL
[Vol. 19, No. 2
The Commission was not concerned solely, however, with prin-
ciple. It had an ample brief in its favour based upon cost. Again the
Commission called in aid the Ontario, and other Canadian, expe-
rience. After looking at the Canadian figures, the Commission was
confident that its scheme could be administered for around 10
percent of the amount collected through levies40 When one compares
this to the 30 percent 47 required for administration of the New
Zealand Workers’ Compensation scheme through insurance com-
panies, it is not difficult to understand why the Commission decided
against insurance company involvement.
c. Adversary Techniques
Once the Commission had defined the content of the adminis-
trative hierarchy, it turned its attention to the method to be em-
ployed in administration. Perhaps the best way to convey the Com-
mission’s view on this point is to offer the following from their
Report:
Informal and simple procedure should be the key to all proceedings
within the jurisdiction of the Board. Applications should not be made to
depend upon any formal type of claim, adversary techniques should not
be used, and a drift to legalism avoided 4 8
Clearly, the bias in administering the scheme was to be toward
the injured claimant and doubts were to be resolved in the claimant’s
favour. Beneficiaries were, therefore, to gain a dual advantage from
the Woodhouse approach –
an increased percentage of the funds
collected were to be available for distribution to them, while at the
same time requiring them to jump through fewer procedural rings
to obtain it.
d. The White Paper Contribution
The White Paper made basically two contributions to thinking
about the Woodhouse administrative concept. First, it examined the
Ontario structure in detail and attempted to assess it with the par-
ticular needs of New Zealanders in mind. The White Paper offered
the view that centralisation would be more difficult in New Zealand
than Ontario both because New Zealand’s population was less cen-
tralised than Ontario’s and because that population may not like
46The 10% figure includes sums to be spent on rehabilitation and accident
prevention: Woodhouse Report, at para. 445 and Appendix 9, table 11.
47This 30:70 cost-claims ratio meant, of course, that administrative expenses
consumed in excess of 40% of the amount paid out in compensation.
48Woodhouse Report, at para. 309(b).
1973]
THE WOODHOUSE REPORT
dealing with a faceless central computer 9 As a possible remedy the
White Paper suggested use of local administrative offices all relying
on a central computer50 This idea led directly to the second point
we should examine. Although the White Paper specifically noted the
advantages of using the existing network of Social Security offices
to partially decentralise the scheme, 51 it nonetheless suggested that
private enterprise might be a viable alternative. “Grounds of cost,
rather than principle”, it said, “may indeed be the controlling factor
in the choice between private enterprise and public authority.” If the
insurance companies were able to administer the scheme, for some-
thing near the 10 percent figure then “such an alternative could be
considered”.5 2 One can almost hear the insurance companies come
glubbing up for a gasp of air.
The difficulty with the position taken by the White Paper –
albeit
in the mild form of a suggested alternative –
is that the Royal Com-
mission seemed firmly to base its case first in principle and only
secondarily in cost. The Commission made it abundantly clear that
its proposed scheme did not belong to “a legitimate field of opera-
tion” for private enterprise.5 3 Therefore, even if the insurance com-
panies could administer the scheme as efficiently as a public entity,
it is doubtful that the Royal Commission would have embraced the
White Paper alternative.
e. The Select Committee Contribution
If the White Paper helped the insurance companies get a sustain-
ing gasp of air, the Select Committee carried out the full rescue
operation. It was on the question of insurance company involvement
that the Select Committee was at its pragmatic best. The insurance
companies offered expertise and facilities throughout the country for
work in this field. It seems that the Social Security Department
would require new facilities and 400 additional staff to administer
the dual schemes suggested by the Select Committee. 4 Since the
Select Committee does not tell us, we can only wonder what degree
of centralisation was envisaged when this estimate was made.
The Select Committee saw two obstacles to insurance company
involvement: the potential conflict between the insurance company
49White Paper, at para. 288.
50 Ibid., at para. 301.
61 Ibid.
52 Ibid., at para. 280.
53Woodhouse Report, at para. 209.
54 Select Committee Report, at para. 39.
McGILL LAW JOURNAL
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interest in profit and the public interest in the new schemes; and the
inability of the insurance companies to administer the schemes as
efficiently as was required. The solution for getting round both these
obstacles was to have the insurance companies act as agents of the
Board. The risk would be carried by the Board and the companies
would be paid on a fee basis for work done.r In effect, this guaran-
teed that the insurance companies could not lose by participating in
the schemes. 5
f. The Act
Although the Accident Compensation Act establishes two separate
schemes, rather than the unified one recommended by the Royal
Commission, it provides that they be jointly administered by one
independent governmental authority to be known as the Accident
Compensation Commission (ACC). The ACC will consist of three
members, one of which must be a lawyer of seven years experience,
appointed for renewable three year terms.5 It is charged with oper-
ating the two schemes and with wide responsibilities in the fields
of accident prevention and rehabilitation. It will operate within the
general responsibility of the Minister of Labour and will be required
to implement the policy of the Government of the day.”
The ACC is the first level of the administrative hierarchy estab-
lished by the Act. It will, through its individual members and other
employees, conduct the initial investigation and inquiry and render
a decision. It has wide powers to employ medical and other spe-
cialists and to delegate power in performing its task.50 In the field,
the ACC will act through its agents. It is provided in the Act that
insurance companies may be appointed as agents and that their
remuneration may consist in fees or commission or both. 0 An in-
jured employee must if the accident occurs at work submit his claim
55 Ibid., at paras. 40-52.
56 There is little else of interest in connection with administration in the
Select Committee Report. With an eye to later discussion of the Act itself,
however, the following quotation is offered:
58 Ibid., at section 20.
9 Ibid., at sections 23 and 29.
60 Ibid., at section 25.
… [W]e are most conscious of the fact that workers’ compensation legisla-
tion which was intended to be readily comprehensible to laymen has given
rise to enormous litigation both here and elsewhere and provided a feast
for lawyers. We would certainly not like to see our proposals overtaken
by a similar fate…: Ibid., at para. 128.
57 Act, at sections 6-7. In order to stagger the expiration of terms, the initial
appointments will be for five, four and three years: Ibid., at section 7(1).
1973]
THE WOODHOUSE REPORT
to his employer who in turn will forward it to an ACC agent.0 1 If
the injury is not connected with work, the claim is to be lodged
directly with an agent 2 A claim must, except in unusual circum-
stances, be lodged within twelve months.P A decision on the claim
must be rendered in writing to the applicant. Agents will have
whatever decision-making power the ACC sees fit to delegate to them.
If a dispute arises concerning the decision, the applicant will be
given an administrative hearing before a single Hearing Officer, as
opposed to the Review Committee inquiry suggested by the Royal
Commission. The Hearing Officer has wide powers to hear any rele-
vant evidence from the applicant or his representative. If the decision
is against the applicant, reasons will be supplied in writing, although
only if the applicant so requests. 64
If the decision is against the applicant he may then appeal to the
Appeal Authority. The Royal Commission proposed that this be a
tribunal including a lawyer and a doctor. The Select Committee also
proposed a tribunal but including one Commission member, a doctor
and some other person “having no administrative association with
the authority”. 5 The Act, however, goes its own way and establishes
a one member Appeal Authority, required to be a lawyer.06 Both the
Royal Commission and the Select Committee were concerned that
a doctor be involved at this stage. The Act gives the Appeal Authority
power to appoint expert assessors, medical or otherwise, as sitting
members for purposes of a particular appeal.V7 While the Act offers
an arrangement which may in general be less cumbersome than a
tribunal, the importance of having a doctor involved may not have
been given sufficient recognition.
The appeal to the Authority will be by way of a rehearing of all
relevant evidence. If the applicant is successful, costs will be award-
ed. Costs will not be awarded against him unless it is determined
that the appeal was vexatious or “ought not to have been brought”.68
Criteria for interpreting the latter phrase are not offered by the Act,
and it is perhaps not unreasonable to expect the Authority to be
most reluctant to make such a finding.
61 Ibid., at section 143.
02 Ibid., at section 142.
63 Ibid., at section 149. The Royal Commission had recommended the limi-
tation period be six years and extendible in unusual circumstances: Wood-
house Report, at para. 309(d).
4 Act, at section 154.
65 Select Committee Report, at Recommendation No. 27.
6OAct, at section 155.
01 Ibid., at section 160.
68 Ibid., at section 166(2).
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If the applicant is not satisfied that his case has been properly
decided by the Authority, he may appeal to the Administrative Divi-
sion of the Supreme Court.69 Finally, the applicant may appeal to
the Court of Appeal, although this appeal must be limited to ques
tions of law.”0
g. Evaluation
In evaluating the extent to which the Act complies with the
Woodhouse Plan principle of administrative efficiency, it is perhaps
best to refer back to the three primary aspects of that principle. The
Woodhouse Plan sought a high degree of centralisation; the Act
reflects a low degree. This may be overcome by some sound admin-
istrative techniques and wise use of computers by the ACC. The
Act, however, leaves plenty of room for movement in the other
direction by allowing delegation of various powers to the local agents.
This delegation has the danger of creating administrative inconsis-
tencies based upon regional or local differences in approach. It may
also be more expensive than centralised administration.
The Royal Commission opted unequivocally for the exclusion of
free enterprise from its scheme; the Act contains an unequivocal
invitation to insurance companies to participate. It is interesting to
note, however, that at the time of this writing the insurance com-
panies have not yet agreed to play their part in the schemes. Perhaps
they are not altogether convinced that they have a role to play,
though no doubt for reasons different from those which moved the
Royal Commission to exclude them in the first place.
The Woodhouse Plan was notable for its emphasis on avoiding
adversary techniques in its decision-making process; the Act pro.
fesses the same goal but may fall short of attaining it. It has been
referred to as the Lawyer’s Compensation Act. Partly because of the
complexity of the Act as a whole and partly because of its appeals
structure, it may well turn out to be a “feast for lawyers”. 1′ The
appeals structure is more court-oriented than was the Woodhouse
Plan and the use of representatives, legal or otherwise, begins earlier
than under the Woodhouse approach. The use of terms such as
Hearing Officer, relevant evidence, and appellant may belie “the
drift to legalism” the Royal Commission cautioned against.
It seems fair to conclude, therefore, that the principle of admin-
istrative efficiency has not been fulfilled by the Act. This conclu-
69 Ibid., at section 168.
71 Ibid., at section 169.
71 See: supra, n. 56, at p. 210.
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THE WOODHOUSE REPORT
sion obviously is based upon a theoretical analysis, and it might be
argued that the true test of the administrative structure offered by
the Act will come in practice. The question is whether society should
afford a theoretically unsound structure an opportunity to prove
itself. That society should do this is open to serious doubt.
IIL. Complete Rehabilitation
Although most proposals for reforming or replacing the common
law negligence system are framed in terms of “compensating” in-
jured persons, this should not be allowed to obscure another kind
of help for injured persons. While that help can take myriad forms,
it is in short, rehabilitation. If the common law system does anything,
it discourages people from seeking rehabilitative aid because of the
need to sustain the effects of injury during the long period leading to
settlement or trial 2
a. The Royal Commission Approach
The Royal Commission was concerned throughout its Report with
the impact of personal injuries both on the persons directly con-
cerned and upon the economic structure of society generally. The
Commission saw great benefits to be gained for both groups from a
thoughtful approach to rehabilitation. These benefits could not be
gained simply by “compensating” people for their losses; much more
was required.
One of the most important tenets of the Woodhouse.Plan, there-
fore, was the physical and vocational rehabilitation of an injured
person. Adopting a definition of rehabilitation used widely in North
America, the Commission advocated a total process approach to
rehabilitation. That is, a total process of restoring an injured person
to “the fullest physical, mental, social, vocational and economic use-
fulness” possible 3
The Commission examined the rehabilitative process both for the
administrative problems it presented and for its impact on the indi-
vidual. Here, as elsewhere in its Report, the Commission noted the
advantage to be gained from a centralised approach to the admin-
istration of rehabilitation programs. It saw the Board as taking an
active role in promoting and co-ordinating adequate programs for
72See: State of New York Insurance Department, Automobile Insurance…
For whose Benefit?, op. cit., at p. 32; J. O’Connell, The Injury Industry and
the Remedy of No Fault Insurance, (Commerce Clearing House, New York:
1971), at p. 18.
73 Woodhouse Report, at para. 354.
McGILL LAW JOURNAL
[Vol. 19, No. 2
medical and vocational rehabilitation. The Board was to secure the
services of an experienced and capable physician to give attention
to these matters in a “medical branch”7 4 He would in turn call
upon other physicians for advice and assistance where necessary.
It was further proposed that the Board allocate $200,000 annually
to be spent “for the general purposes of rehabilitation”Y5
From the perspective of the injured person the Commission was
concerned to ensure that every possible incentive be offered to en-
courage good faith attempts at rehabilitation. The idea of a penalty
against those who refused to participate was rejected 6 Reluctance
and apathy were to be overcome by persuasion and education. A co-
ordinated program of expert assistance was to be offered to each
injured person. All reasonable medical expenses were to be paid by
the Board 77 and no reduction in compensation was to occur due to
improvement achieved.78
The White Paper examined in detail some of the difficulties that
might arise in putting the Woodhouse proposals into action. It found,
however, little lacking in the Royal Commission approach. The Select
Committee was equally receptive to the Commission’s proposals in
this area. It endorsed the view expressed in the White Paper that
success in this endeavour depended largely upon the Board itself
and that “it might not be desirable to fetter it with too much detail
in advance of the scheme getting under way. ‘7 9
b. The Act
The Accident Compensation Act incorporates the Royal Com-
mission approach to rehabilitation while heeding the caution of the
White Paper.80 The ACC is required to take a very individualised
approach to rehabilitation, with each case to be considered and
worked with as its needs demand. Those persons and organisations
directly involved in the rehabilitative process are expected to co-
operate closely with the ACC, and unilateral action may be taken by
the ACC where it considers that such action is necessary. The Act
places particular emphasis upon the reinstatement of injured persons
in employment.8 1 This includes their previous employment where
74 Woodhouse Report, at para. 432(4).
751Ibid., at para. 432(7).
76lbid., at para. 398.
771Ibid., at para. 387.
78 Ibid, at para. 404.
79White Paper, at para. 310.
8OAct, at sections 48-53.
8lIbid., at section 48(2)(b).
1973]
THE WOODHOUSE REPORT
possible or training for new employment if necessary. In addition,
the Act encourages the ACC to provide special financial assistance to
meet a wide variety of needs.
In order to facilitate this task the ACC is to have a special divi-
sion, headed by a distinguished medical practitioner, in charge of
matters relating to rehabilitation.” The chief aim of this division will
be to work for co-operation and co-ordination among those organisa-
tions and individuals concerned with rehabilitation. There is no
specific sum nominated by the Act for spending in this area but one
would certainly expect the expenditure to equal or exceed the
$200,000 suggested by the Royal Commission.
The more general function of the ACC in regard to rehabilitation
is that of research and reporting on various aspects of the rehabili-
tation process. This activity presumably will lead to improved
methods of rehabilitation and to lower costs in the l9ng term.
c. Evaluation
The principle of complete rehabilitation is the one among the five
Woodhouse Plan principles which finds perhaps the highest degree of
fulfillment in the Accident Compensation Act. In view of the primary
importance of this principle in the Woodhouse Plan this is no mean
accomplishment. The reason the Act measures up so well on this
point, however, is not difficult to discern. In spite of its importance,
or perhaps because of it, rehabilitation is the component of the
Woodhouse Plan which generates the least amount of controversy
over principle. There may be differing views about practical aspects,
of the process, but everyone agrees that it ought to be done. Thus,
while lamenting the fact that other principles may not have fared
so well, one may rejoice that this one has come through the legis-
lative process relatively unscathed.
Unfortunately, however, the rejoicing may be premature. Al-
though the legislative process may not have launched a direct attack
on the principle of complete rehabilitation, it may be that it has out-
flanked it. The Royal Commission was of the view that “the compen-
sation process should always be secondary to the goal of rehabili-
tation.. ….Y1 It is my next task to examine the compensation process
offered by the Act. We will then be in a position to assess the relative
integrity of rehabilitation in the Act.
82 Ibid., at sections 51 and 52.
8 3Woodhouse Report, at para. 428.
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[Vol. 19, No. 2
IV. Real Compensation
It was not the primary aim of the Woodhouse Plan to provide
compensation in monetary terms for accidental injury. This was,
however, an important facet of the scheme. The Royal Commission
thus identified “real compensation” as one of its five basic principles:
… [R]eal compensation demands for the whole period of incapacity the
provision of income-related benefits for lost income and recognition of
the plain fact that any permanent bodily impairment is a loss in itself
regardless of its effect on earning capacity.8 4
a. Moving Away From the Common Law
It is clear from the above definition that the benefits offered by
the Plan were to be income-related and to have two goals: compen-
sation for actual loss of earnings; and compensation for loss of
bodily function through permanent physical disability.
Temporary disability, on the one hand, was to be compensated
according to actual loss of earnings. The relevant income was to be
that coming in at the time of the accident, and benefits were to
be paid at the rate of 80% of the amount remaining after taxes.”‘
The payments were to be on a periodic basis commencing the day
after the accident. For the first four weeks after the accident,
however, it was suggested that payments be limited to a maxim-
um of $25 per week. If the injury lasted eight weeks or longer,
the Board was to go back and pay the difference, if any, between
$25 and the effective rate of compensation at the 80% figure.86
This was a device designed by the Commission to avoid the drain
on funds which had occurred under the Workers Compensation
Act due to providing compensation at the full rate for thousands of
minor injuries. The Commission was confident that “no man facing
some short-term incapacity would wish this situation to continue. 87
Although some stand-down period is no doubt required in view of
the Worker’s Compensation experience, it is possible that the Com-
mission in its zeal to free more money for serious injuries dismissed
short term injuries a bit too lightly. After the four week stand-down
period was over, the ceiling on compensation was to be raised to
84Ibid., at para. 55.
85 Ibid., at para. 292(b).
86 Ibid., at para. 301. A different kind of stand-down period was suggested
for housewives and non-earners. For them compensation would not commence
until two weeks after the injury. If the incapacity lasted eight weeks or longer
compensation would then be payable for the first two weeks: Ibid., at para.
292(e).
87 Ibid., at para. 301(c).
19731
THE WOODHOUSE REPORT
$120 per week. The minimum compensation payable throughout was
to be pegged at the amount paid under the social security sick-
ness benefit for a single person.88 In 1967, this was $11.75. It was at
this rate that housewives and other non-earners were to be com-
pensated.
Permanent disability compensation, on the other hand, was to be
assessed on the basis of a schedule.89 But this compensation was
also to be earnings-related. The schedule was to be used as a flexible
guide and the Board was to have discretion to deal with anomalous
cases. The schedule was to list serious permanent injuries and iden-
tify a percentage of total disability to be allocated to specific in-
juries. This schedule percentage was then to be related to earnings
in the following manner: take 80% of tax paid earnings and mul-
tiply that times the schedule percentage; the answer is the amount of
weekly compensation payable. The minimum amount payable was
to be $20 per week. Injuries not appearing on the schedule were to
be compensated on the basis of a medical assessment. For a variety
of minor incapacities, the Commission recommended lump sum pay-
ments rather than earnings-related periodic payments 0
There is thus no proof of general damages, as such, involved in
the Commission’s approach. The process is a reasonably mechanical
one, on the whole, although the discretion allowed would result in
a measure of flexibility. The Commission conceded that some anom-
alies would result from this mechanical approach. There were,
however, counterbalancing advantages to be gained. Because the
process was mechanical it could be done quickly and with certain
results. In addition, this approach seems to be consistent with the
Commission’s desire to eliminate from their scheme the use of
adversary techniques. There would be no need, for example, for the
injured party to present evidence of how bad the injury was for him
personally, in order to inflate a claim for pain and suffering.91
In case of death, the Commission proposed that a widow be
compensated at one-half the rate her husband would have received,
plus a $300 lump sum payment. In addition, for each dependent
child the widow was to receive one-sixth the amount her husband
would have received? 2
88 Ibid., at para. 300.
so Ibid., at para. 303.
90 Ibid., at para. 304(b).
91 For a revealing empirical study of the functioning of damages for pain
and suffering, see: O’Connell and Simon, Payment for Pain and Suffering:
Who Wants What, When and Why?, [1972] IlM. L.F. 1.
92Woodhouse Report, at para. 302.
McGILL LAW JOURNAL
[Vol. 19, No. 2
There was no upper age limit for receiving compensation designa-
ted by the Commission. There was, however, a lower age limit of 18
years set. This was waived for earners making $15 or more per week.
Permanent incapacity was to be assessed for a young person at 18
years of age.9 The Commission gave very little attention, however,
to the problems involved in assessing lost potential earning capacity.
It was recognised as a “practical problem” but little effort was made
to examine in detail how this was to be solved.
Finally, the Commission provided that all reasonable costs for
medical care should be paid along with various other aids for reha-
bilitation. In the case of death, funeral expenses up to $200 were
to be paid.
b. Rescuing the Common Law
The White Paper examined various aspects of the Royal Com-
mission’s proposed compensation arrangements. For our purposes,
one suggestion put forward in the White Paper is most important.
After observing that compensation for loss of dignity seemed to be
built into the Woodhouse schedule and that the discretionary power
probably allowed for extreme cases of pain and suffering, the White
Paper suggested that:
… it might be preferred to make explicit provision for compensating
pain and suffering and other common law heads of damage by allowing
lump sum payments with an appropriate ceiling for each category written
into the legislation.94
The Select Committee seized that suggestion with vigour. The
result is that the compensation arrangements suggested by that Com-
mittee, and provided for in the Act, bear less resemblance to the
Woodhouse proposals than to the common law. The Select Com-
mittee suggestions are for the most part found in the Act.
c. The Act
The Accident Compensation Act provides for two basic types of
compensation: earnings-related compensation and compensation for
non-economic loss. In addition, provision is made for compensation
in the event of death and for miscellaneous expenses.
The earnings-related compensation is payable in periodic pay-
ments from the eighth day after the injury at the rate of 80% of lost
earning capacity.9 5 The earner’s lost capacity is determined by sub-
93Ibid., at para. 283.
94 White Paper, at para. 123.
95 Act, at section 113.
19731
THE WOODHOUSE REPORT
tracting from his previous earnings, before tax, the amount he either
is earning or is capable of earning after the injury. There is a maxi-
mum limit of $160 per week and a minimum level of $40 per week
plus $3 per week for a non-earning wife and $1.50 per week for each
child so long as the total amount paid does not exceed 90% of
previous gross earnings.96
The initial level of compensation payable must be reviewed once
the condition of a permanently incapacitated person has stabilised.
At this stage a written assessment must be made and a permanent
level of compensation designated. Thereafter, the level of compen-
sation can only be adjusted upward; no reduction of compensation
is allowed 7
The Royal Commission was concerned to avoid too large a drain
of funds to short term injuries, and therefore placed an arbitrary
limit on compensation for injuries of four weeks or less duration.
Similar considerations prompted the Select Committee to suggest its
own form of stand-down period. Rather than adopt the Woodhouse
approach, the Select Committee would pay no compensation at all
for the first week of disability but the full amount thereafter. Con-
scious of the hardship this might cause some injured persons, it
further proposed that:
… for the first week of disability employers should be encouraged to
make direct payments to injured employees in lieu of wages; and at least
in the case of injuries to employees at work, employers should be placed
under a legal obligation to pay…98
The Select Committee encouraged employers and employees
to
arrange sick leave entitlements to cover the first week. It further
observed that where this could not be done suitable insurance cover
might be arranged by the employer.
The first draft of the legislation incorporated the Select Commit-
tee idea, and then some. It placed employers under a legal obliga-
tion to pay first week compensation for all injuries, regardless of
whether they were work-connected.9 9 This brought a storm of protest
from employers. It seemed to be their view that they should not have
to bear responsibility for injuries which occur outside work in
circumstances over which they obviously have no control. Their
protest did not fall on deaf ears. The legislation was altered and as
enacted requires an employer to pay the first week’s compensation
96 Ibid., at section 116.
97 Ibid., at section 114.
98Select Committee Report, at Recommendation No. 21(c).
“9 Accident Compensation Bill, No. 46-1, at cl. 107.
McGILL LAW JOURNAL
[Vol. 19, No. 2
only for injuries “arising out of and in the course of employment”.
A self-employed earner must bear the cost of the first week himself
for all injuries. 100
There are several questions which arise concerning the first week
provision: Was the first draft of the legislation straining the logic
behind continuous cover too much to say that employers should be
responsible for all injuries, work-related or not? Will an employee
who is injured outside work have a negligence action for his first
week’s damages? Will self-employed persons who receive no pro-
tection at all have a negligence action for the first week’s damages?
Will unions accept an agreement that reduces their sick leave for an
on-the-job injury that may in their eyes have been the employer’s
“fault”? Why is there no sanction for dilatory employees in the first
week provision? Answers to most of these questions await expe-
rience under the scheme. A better solution to the whole problem
may be to pay the first week’s compensation to everyone on a social
security basis, out of general taxation funds.
The Act includes provisions for compensating potential loss of
income by young persons. 0 1 The Royal Commission had given too
little attention to this matter; and the Select Committee did no more
than recommend a discretionary approach based on sound policy.
The failure to give adequate attention to this area has resulted in
a provision which is less than satisfactory. A person who suffers a
potential loss of income may receive up to $40 per month unless the
Commission exercises its power to increase the compensation by up
to 50% above the prescribed amount. The highest amount of earn-
ings-related compensation available to someone under this section,
therefore, is $60 per month. This is clearly an inadequate amount.
But more importantly, the section cuts out a large number of poten-
tial earners by requiring that to receive this compensation a person
either be injured in a motor vehicle accident or have cover as an
earner under the Act at the time of the injury. This requirement will
no doubt result in barring a significant number of University students
from receiving benefits under this section, meager though they are.
A person receiving earnings-related compensation will continue
to do so until he reaches age 65. Arrangements can be made, however,
to extend payments beyond that time if the person injured is age
60 or above.0″
10 Act, at section 112.
101 Ibid., at section 118.
102 Ibid., at section 128.
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THE WOODHOUSE REPORT
The greatest departure from the Royal Commission’s compensa-
tion proposals is to be found in the Act’s provision for compensation
for non-economic loss. The Commission recommended a substantial
departure from the common law; the Act, on the other hand, incor-
porates many of the common law concepts. The Act offers two types
of non-economic compensation. For “loss or impairment of any
bodily function” lump sum compensation is to be awarded accord-
ing to a schedule up to $5000.103 The schedule, drafted by an expert
medico-legal committee, lists percentage for various types of per-
manent injury.0 4 If the injury in question is on the schedule, the
amount to be awarded is the appropriate percentage times $5000.
There is nothing in the Act to indicate that the schedule is a flexible
guide, as recommended by the Royal Commission. Rather, the
amount listed is the amount to be paid. If the injury in question is
not on the schedule it is up to the ACC to determine an appropriate
percentage on the basis of a medical assessment.
The second type of non-economic compensation offered by the
Act is for dignitary loss. For any personal injury covered by the Act,
whether or not it results in permanent disability, compensation may
be paid for loss of capacity for enjoying life, including loss from
disfigurement, and for pain and suffering, including nervous shock.
The injured person may receive up to $7500 under this section,
unless no award was made in respect of permanent disability. In
that case the maximum amount payable is $12,500.15
If the injury results in death, the Act provides that no payment
be made to the deceased’s estate for non-economic loss. Earnings-
related compensation will be paid to dependents at the same frac-
tional rates recommended in the Woodhouse Plan. 6 In addition,
lump sum payments may be made of $1000 to the widow plus $500
for each dependent child up to a maximum of $2,500.:17 Obviously
this is more generous than what the Royal Commission had offered.
103 Ibid., at section 119.
104 Act, at Second Schedule.
105 Act, at section 120. The $12,500 limit payable under the Act has been
criticised, especially by members of the legal profession, as seriously inade-
quate. A figure of $20,000 has been suggested as adequate: Wellington District
Law Society Seminar on the Accident Compensation Bill, Reports of Group
Chairmen, (Report of Mr. H. Rennie, October 7, 1972). Although presumably
aimed at helping a few very serious injuries, raising the limit to $20,000 would
likely have the effect of inflating all awards under the Act. It clearly would
give more scope for inflating non-economic damages under section 120.
106 Act, at section 123.
107 Ibid., at section 124.
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d. Evaluation
There have been in this section of the article many comparisons
made between the Woodhouse Plan principle of real compensation
and the compensation offered by the Act. There is very little to add
at this stage. The compensation provisions of the Act are clearly
based in the idea that common law damages concepts are still
viable. The Royal Commission wanted a much cleaner break with the
old concepts. The proof of the Act’s faith in the common law will
come in practice. In any case, it seems clear that real compensation
as the Royal Commission defined it is not found in the Act. Compen-
sation assumes a larger importance under the Act than it did in the
Woodhouse Report. This may prove to be an improvement. There
must be a danger, however, of the incentive to inflate non-economic
losses overtaking the important process of rehabilitating the injured
person. The Woodhouse Plan attempted to escape the former while
emphasizing the latter. Whether the Act should have followed suit
remains to be seen.
V. Conclusion
This article largely has been devoted to an analysis of the sub-
stance of the Accident Compensation Act. The Act should not, how-
ever, be considered in isolation. It must be viewed in the context of
the political events which surround it. Other writing on the Wood-
house Plan has done that in detail.0 s The statement by Dr. Sutch,
set out at the beginning of this article, reflects the feeling that the
law and politics of accident compensation reform are closely inter-
woven.
On November 25, 1972, a political event occurred which is sure to
have an important impact on the future of the Accident Compensation
Act. On that day New Zealand electors brought the Labour Party into
power, unseating the more conservative National Party. The Act was,
to be sure, no more than a minor election issue, but the Labour Party
manifesto committed the Party to altering the Act to bring it more
into line with the Woodhouse Plan.
Upon coming into power the Party was faced with a rather diffi-
cult situation. It had an Act passed after years of delay and pains-
taking work. The Act was not, however, to come into force until
October, 1973. Immediately after the election, rumours were rife;
the Act was out, the Labour Party was going to make changes and
this meant *more delays. Delay might be worthwhile if it meant a
108 See: Palmer and Lemons, supra, n. 40.
19731
THE WOODHOUSE REPORT
better legislative product. On the other hand, “half a loaf is better
than none”. Perhaps it is better to give the Act a chance and in the
meantime consider changes.
The Labour Party has not, at the time of writing, made public
what it intends to do. The writer was privileged, however, to get
the personal views of Dr. A. M. Finlay, the new Minister of Justice.
It is his view that the Act should be allowed to come into force as
planned and that work should then be done from the ground up on
a new compensation scheme. It should be emphasized that this is
not the official policy of the Party as yet. However, Dr. Finlay must
be regarded as the most able Labour party politician on matters
concerning accident compensation reform. His views are likely,
therefore, to be very influential in the formulation of Labour Party
policy.
It is then most likely that by October, 1973, New Zealand will
have in operation its accident compensation scheme. This article has
taken issue with many aspects of the Accident Compensation Act,
and on balance must be taken as supporting much of what Dr.
Sutch has said. It does not appear, however, that the Woodhouse
Report is relegated to the archives. Within the next three years new
life should be breathed into the Woodhouse concepts, if the Labour
Party is to make good its promise. Lawyers, academics and politi-
cians around the world will no doubt await with interest develop-
ments along these lines in a country well-known for its willingness
to experiment with bold social reforms.
* Since the time of writing, the Labour Party has announced that the Act
will not come into force in October, 1973 as planned. Instead, implementation
will be delayed until, at the earliest, April, 1974. In the meantime, the Act
… Evening
will be redrafted to include housewives and other non-earners:
Post, (March 10, 1973), p. 4, col. 3.
