ACC architect Sir Owen Woodhouse lays it on the line

Sir Owen Woodhouse

If ACC architect Sir Owen Woodhouse is disappointed the government has abandoned plans to revert to his pay-as-you-go ACC model and stick with the fully funded system, he’s not showing it.

For a man who has presided over countless courtroom battles he gives the impression he sees it as a small glitch on the path to vindication.

Back in 1967 the former president of the Court of Appeal chaired a Royal Commission into Accident Compensation which led to the creation of New Zealand's much acclaimed no-fault accident compensation scheme.

It was funded on a pay-as-you-go basis just like health, education and other social services.

But in 1998 the National government changed it to a fully funded insurance scheme, setting levies in each year to cover the whole future cost of accidents which occurred in that year.

"ACC suddenly became far more expensive when it became a funded system and that was a grave mistake," the sprightly 95-year-old says.

 "Immediately the cost advantage and accuracy of a pay-as-you-go welfare based system disappeared and every year since then both employers and all owners of vehicles have been required to pay much larger sums than are necessary."

Speaking exclusively to NBR ONLINE in his rambling Remuera home, Sir Owen chooses his words carefully, all too aware ACC is a hot political potato which has cost many people in high places their jobs and reputations over the years.

The fallout from the recent Bronwyn Pullar affair alone has claimed the scalps of an ACC Minister, the chairman, the chief executive and three directors, and the retired judge does not want to become collateral damage.

Which is why he made it clear from the outset that "I have no intention or desire to take sides in a political debate. After all, it was a bipartisan political decision which introduced the system".

But that said, he wasted no time commenting, albeit diplomatically, on the stands being taken by politicians with regard to ACC.

Labour and the Greens favour a return to a pay-as-you-go system which some say could see premiums plunge by up to 25%.

And until a few days ago National appeared to be entertaining similar thoughts, but is now backtracking in favour of the fully funded model or perhaps even privatisation.

National’s about face is not what Sir Owen wants to hear. But rather than engaging in a slanging match he prefers to re-state what he sees as the overwhelming advantages of his system.

He says the pay-as-you-go system originally envisaged for ACC needed a levy of no more than $1 in $100 of wages.

It would also slash levies on car licences from $228 a year at present to about $100, and on motorcycles from up to $491 to $50.

"The other benefits are that the levies could be averaged; the individual Work, Earners, and Motor Vehicles accounts could and should be amalgamated; and the way would once more be open to extending the system to sickness incapacity as proposed by the Law Commission.

"There's also the matter of the $15 billion of accumulated funds presently in hand.

"These excess funds, which are now held as investments, would become available as a large and necessary contingency reserve against the risk of a major disaster, with an appropriate balance available to underwrite reduced levies."

His advice to those who want to revamp ACC is very simple.

"When you are peering into the future it is not at all a bad idea to remember where you have been.

"The social responsibilities which underpin ACC ought never to be tested by clever equations, or brushed to one side by economic dogma.

"In the end, they depend on decent fellow feeling and the ideas and ideals that support it."

Such was the regard that his original scheme was held in that the  Australian Prime Minister at the time, Gough Whitlam, asked him to come up with something similar for Australia.

He duly produced a blueprint for an accident compensation scheme which also incorporated sickness incapacity.

Mr Whitlam was mightily impressed, with the result that the two became close friends.

But before Mr Whitlam had a chance to implement it he was controversially sacked as prime minister by Governor General John Kerr.

The pair remain good friends to this day, but the 95-year-old Australian is in failing health and there are concerns for his wellbeing following the death of his wife Margaret a few months ago.

Sir Owen describes him as a man of "immense intelligence and ability who had a real vision for his country".

The New Zealander knows only too well the grief his friend is suffering as a result of his wife's death.

Sir Owen's wife, also called Margaret but known as Peggy, died more than a decade ago, leaving a vast gap in his life.

Despite being five years short of becoming a centenarian, he still lives by himself, surrounded by the memorabilia of a very full and active life.

By today's standards he is "old school", polite and courteous to a fault, even serving coffee and cake to this reporter from a tray that he carried into the living room.

Getting him to talk about himself is no mean feat as he is a modest man who is clearly uncomfortable at saying anything that might be construed as self-serving.

He even drew the line at having his photograph taken alongside a painting of the naval vessel he served on during World War II.

It was while serving as a lieutenant commander on active operations in the Adriatic that he won the Distinguished Service Cross for gallantry, later working as a liaison officer with the Yugoslav partisans.

After the war he returned home and practised law before being appointed a judge of the former Supreme Court (now High Court) in 1961 and going on to become president of the Court of Appeal from 1981 to 1986.

He later became president of the Law Commission and a Privy Councillor and member of the Judicial Committee of the Privy Council.

By any standards it was a stellar judicial career marked by his world-leading reforms of accident compensation and ground breaking work to even up the division of matrimonial property, something that was influenced by his “rather wonderful wife”.

During his time as president of the Court of Appeal he became involved in the Air New Zealand Erebus disaster, presiding over a judicial review of certain findings in the controversial Mahon report.

Justice Peter Mahon headed a Royal Commission of Inquiry into the crash and accused Air New Zealand of a conspiracy and a cover-up, saying that he had listened to “an orchestrated litany of lies” from the airline.

Not surprisingly, the airline took umbrage at this and went to the Court of Appeal.

Sir Owen and the four judges who sat alongside him took Justice Mahon to task, concluding that by “not directly confronting the alleged conspirators with his grave findings of concerted misconduct" he breached the laws of natural justice.

Today, Sir Owen is reticent about discussing the case, not wishing to cause distress to the widows and families of the late Justice Mahon and Jim Collins, the captain of the doomed airliner.

But he stands by his findings and his firm belief that the Chippindale report into the accident, which largely put it down to pilot error, got it right.

“There was a chain of unfortunate events which contributed to the disaster but the ultimate cause was the captain’s decision to descend below 16,000 feet when there were written instructions, actually carried in the flight deck, prohibiting this.”

As with almost everything he says Sir Owen delivers these words with the gravitas of the Bench, his eyes locked on his audience daring them to avoid his gaze, but it’s not done in an intimadatory or hostile way.

It is the pose of a man speaking with the authority and conviction of someone who knows his subject inside out and does not wish to be trifled with.

But sometimes appearances can be deceptive and  there is, by his own admission, a sentimental and deeply caring side to the man when it comes to the welfare of his fellow human beings.

If there’s one thing lacking in society and the law today, he says, it is mercy.

“When the monarch takes the various oaths at his or her coronation they say 'in mercy I will do these things'.

“To me, that means the society we live in ought ot make its decisions in a just, balanced and merciful way, especially as far as the law is concerned.

“I think any judge should be left with some kind of discretion to exercise mercy, but we’re getting to the stage where no judge would be prepared to do this because it would probably be overruled in the Court of Appeal.

“Why should we feel it necessary to have sentencing put into a moral straightjacket?”

To illustrate his point, Sir Owen recounted the story of an offender who contacted him some years after appearing before him in the High Court.

“I got a telephone call from the man who said 'you won't remember me, but I did something wrong and they told me I would be going to prison for two years'.

“'To my amazement, you discharged me without conviction and ordered me to pay $2000 towards the cost of the prosecution'.”

The man then explained that as a result of this he had turned his life around and now held a position of great trust and responsibility.

It is a story which still resonates with Sir Owen all these years later.

“To salvage a life like that is pretty important, isn’t it?” he says. “It makes you feel quite good when that happens.”

His son is Justice Peter Woodhouse, QC, a judge of the High Court.

His daughter, the writer and Auckland District Health Board member Susan Buckland, says what her father did on that occasion is typical of his humanitarian nature.

“Fairness is central to dad’s view of life,” she says. “And it is behind his life-long desire to try and help those less able to help themselves.

“I can remember the house being awash with files and papers as he pressed on through multiple midnights to finish his ACC report and to condense the complexities of a revolutionary proposal into a lucid document that could be easily read and understood.
 
“Meanwhile, he  signs off notes to his grand- and great-grandchildren with 'be kind and good', and is not beyond reminding his middle-aged children to be the same.”

In most respects, the eminent jurist is more than satisfied with the administration and application of law in this country and believes the newly created Supreme Court is a success.

“It takes a while for this kind of change to settle down but I think on the whole those who have been appointed to the Supreme Court have done well.

“I was told by Lord Diplock when I was sitting beside him in the Privy Council that he thought that little New Zealand had a particularly strong appellate court.

“In fact, he said he didn’t think it was outdone by any of the others in the Commonwealth so I have no doubt we have the right people now to do this.”

Sir Owen also believes it is probably inevitable New Zealand will eventually become a republic, although it is not something he personally favours.

“I know that in some ways it sounds a bit absurd to have a head of state on the other side of the world. But for myself, I think the present system is a pretty efficient and sensible one that doesn’t cost us anything.

“To put a different one in place is going to be very awkward.

“How are you going to appoint that person? Is it going to be done the way it is at the moment by the people who happen to be in government or should there be an election of the president of the country?

“Yes, I know what we have now is absurd in some ways, but for me I’d rather leave sleeping dogs lie.”

And on that note, it was time to take leave of Sir Owen Woodhouse, ONZ, KBE, KB, DSC - but not before he pressed a very fine bottle of shiraz into my hand.

“I know you will be cross with me for giving you this, but please accept it,” he said, locking me once again in his sights.

Accepting gifts is a cardinal sin according to the journalists' training manual. But it offers no advice on what to do when they are offered by of one of New Zealand’s most distinguished High Court judges.

After all, their word is sacrosanct, be it in the courtroom or their place of abode, and I had no option but to thank him profusely and disappear down the street, bottle in hand.  

READ ALSO: ACC architect Sir Owen Woodhouse dies aged 97 - Key pays tribute


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Congrats to NBR for achieving this interview. Sir Woodhouse is a man of unquestionable vision and a level of commonsense sadly lacking in all the politicians that have meddled since ACC's inception. Lets not forget how the ambulance chasing lawyers were to some extent reigned in by the ACC creation. For generations the kiwi ego has been elevated beyond reason and the certainty that no 8 wire and anyone wearing black was a natural born talent and the world listened. How easy it was to pop that myth to anyone who travelled, but in regards to the original ACC model I suggest it was genuinely world class until the idiots started messing with it.

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Excellent interview and report Rod. What a gentleman, a real kiwi hero in my view. Lets hope the powers that be read this too in regards to ACC.

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What ever system we get in the end, those delivering services need to be held more accountable for results of the services they deliver.

"A lady came to me after she had been to ACC Psychiatrists, Psychologists and Counselors over a period of 4 yrs. A bus had hit her car and the trauma was preventing her from driving. 15 mins of psychosomatic healing , she jumped in the car, to her husbands amazement and has been driving since.
http://www.psychosomatic-healing.co.nz/cases.handled.html

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What a marvelous man - would that we could breed his like today - courtesy and kindness combined with great intellectual strength and high position, not many like that to be found among us today.

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What a wonderful article. If only we could turn back to the original intention of ACC. and not be part of welfare and political twisting.
Im afraid its a bit like the DPB. When ever we have new social policy we fail to forecast the secondary consequences, how people change behaviour to receive or escape the legislative intention.

ACC was a no fault set up but then we introduce OSH which for most employers has become an over zealous night mare, let alone the infamous American like court cases.

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I agree with him about the drivers for ACC. I'm confused about future promises of governments that are part of the social settlement, so I am confused about the funding mechanism.

Anonymous #5, if we don't have full employment, then there's a corner case where someone incurs an injury and concurrently their industry goes away. The Danish are nearest to having a sensible response, with flexicurity, but we're a different-shaped economy, so it might not work for us.

With regard to the other thing, I wonder if Jim Collins is one of "those less able to help themselves".

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Ah the National Party again costing us all more than we should be paying, are they trying to enslave us?

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National, John Key and the MMP system cannot and will not change a thing as the total and complete focus is on the retention of power.
Not on the desperate needed changes such as ACC.

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Exactly: it's all about power-retention. In that regards, Key is no different than his predecessor. People need to recognise --ALL our PMs are cut from the same cloth. The only difference is the colour of the fabric.

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It is interesting that the same people who think we can't afford the forecast escalating cost of National Superannuation without some element of pre-funding, or reduction of benefits, think we can have a pay-as-you-go ACC Scheme without some pre-funding, or reduction of benefits. The future added cost of a pay-as -you-go ACC
Scheme is no different than the future added cost of taxation to support pay-as-you-go Natioanl Speranuation. They are both a cost to be met by future generations for the benefit of the current generation.

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"The social responsibilities which underpin ACC ought never to be tested by clever equations, or brushed to one side by economic dogma.

"In the end, they depend on decent fellow feeling and the ideas and ideals that support it."

Absolutely: unfortunately we live in a world nowadays ruled by economic dogma, where "decent fellow feeling" always plays second fiddle to fear and commercial mistrust.

We should, as a community, seek to reinstitute those "ideas and ideals" across the board. Many social problems would be resolved more cheaply than with any number of economic theories.

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I tis a pity there aren't more Gentlemen running the country like Sir Owen Woodhouse. Intelligent, dignified and courteous to a fault.
Sadly we are unlikely to find that in Parliament where it is most needed.

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great interview but I don't believe the Scheme costs more. Pay as you go in effect results paying for claims from all preceding years. e.g. in year 1 - just payments for year 1, in year 2, payments for year 1 claims plus year 2 claim costs and so on. By year 20 payments are being made for claims from each of the preceding year. Theoretically there comes a point where claims in and claims out level off (called maturity). This hadn't happened by the time the ACC funding basis changed. There is an intergenerational issue - current claimants paying for claims that occurred 20 years ago.

Under full funding - the basis is that you need to collect levies to cover the expected cost of claims to exit. This takes account of investment returns (i.e. how much to I need to collect today so that that mney plus investment returns to meet the expected cost of claims). This matches the way costs have to be accounted for. Under PAYG there would be huge deficits shown because all I need on the asset side is enough cash to pay for the next year's claims but on the cost side I have the amount needed to fully fund future claims.

Technically in the long term once 'maturity' is reached the difference in the levy rate paid is the investment income earned.

One perversity is that a change in the interest rate affects the amount of levies I need to keep. The higher the expected return the less levies need to be collected and vice versa. This masks ACC performance.

What drives the cost of the scheme is duration of claims and claims frequency. ACC should be accountable for the first and incentives (via pricing) in place to reduce the second.

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I detest ACC.

I think no fault is much of what is wrong with NZ today - people drive badly , have unsafe work places and so on mainly because they know that they will suffer next to no consequences if they injure or kill someone.

My car insurance in the UK would have rocketed if I had an accident, so I would have had a direct consequence of my lack of care and attention. Here, nothing would change, ACC would pick up the tab and I would be entirely unaffected.

Also, it seems to be a vast layer of bureaucracy which is already repeated in both the Health Service (who fix all the medical claims anyway) and WINZ who already have all the processes in place to pay lost income.

Surely simpler just to collect tax and give it directly to the health service tof fix the injuries and have people claim lost income via WINZ who are all set up to do just that?

ACC serves no purpose really, other than to cost us all a heap of cash. As a method of delivery, it adds no value to what the health service and WINZ could deliver.

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