Chapter 16 Tobacco litigation in Australia

Jonathan Liberman

Attachment 16.2

Stefanie Driskell
Section 16.2, Section 16.3
David Ruschena

Updated 2011 by
Indra Haslam

The purpose of this chapter is to describe the progress of tobacco litigation in Australia over the past two decades.

The role of litigation in tobacco control

Litigation is important in tobacco control because it has significant potential as a regulatory tool that complements more traditional regulation by government.

The use of litigation as a tobacco control regulatory tool may be directed toward reducing smoking rates, reducing the burden of tobacco use on the state—by fixing the burden on industry—or changing social norms and expectations about smoking. These functions may be secondary purposes of litigation brought for another reason or reasons, such as compensation for personal injuries, or the very reason for the initiation of litigation.

Using litigation in this way is not new. The High Court of Australia has acknowledged that important effects flow from the assignment of responsibility to persons or companies that impose unreasonable risks and/or cause harm.[1] These effects include: compensating persons for loss caused by such conduct; deterring unreasonably hazardous conduct in the future; and encouraging innovation in product design, packaging and advertising to reduce the risk of injury or disease.[2]

Litigation involving the tobacco industry spans many different types of legal proceedings, including: personal injury claims made by smokers or claims relating to money spent treating sick smokers; claims by asbestos manufacturers or their insurers seeking contribution from tobacco manufacturers for the damages they have paid to sufferers of asbestos related diseases; and claims by either the tobacco industry or the tobacco control movement seeking to change or restrict the conduct of the other. In addition, litigation against employers and occupiers of public venues over the harms caused by secondhand smoke has played an important role in tobacco control, both in Australia and overseas.

In the United States, litigation against the tobacco industry has brought significant achievements. It has resulted in access to millions of internal industry documents; added to the industry’s loss of legitimacy; helped change the industry’s previously intractable stance that smoking has not been proved to cause disease; and added around $10 billion a year to the industry’s costs, forcing substantial price increases that have contributed to declines in US smoking rates.[3]

It has seen courts make significant findings against the tobacco industry, expressing strong condemnation of its behaviour over the years. In a 1600 plus page judgement handed down in August 2006, in a case brought by the US Department of Justice against the US tobacco industry, Judge Kessler of the US District Court found that the industry had falsely denied the health effects and addictiveness of smoking, manufactured products so as to create and sustain addiction, fraudulently marketed “low tar” and “light” cigarettes, marketed to young people including children under the age of 18 and concealed and suppressed information to protect against litigation and to avoid regulation.[4] Judge Kessler wrote: “In short, Defendants have marketed and sold their lethal product with zeal, with deception, with a single-minded focus on their financial success, and without regard for the human tragedy or social costs that success exacted.”

The value of tobacco litigation as a public health tool is recognised in the Framework Convention on Tobacco Control. In its guiding principles, the FCTC declares that “[i]ssues relating to liability, as determined by each Party within its jurisdiction, are an important part of comprehensive tobacco control”. Article 19.1 requires Parties, “[f]or the purpose of tobacco control”, to “consider taking legislative action or promot[e] their existing laws, where necessary, to deal with criminal and civil liability, including compensation where appropriate”.

Although tobacco control advocates in the United States have made significant progress in achieving their aims through litigation, even in the US, tobacco litigation has not been easy or always successful. The tobacco industry has spent vast sums (estimated at up to $900 million per year)[5] in defending litigation, and itself launches litigation in order to restrict the activities of tobacco control advocates. One aspect of the industry’s defence approach is a deliberate litigation strategy to argue every point of law available to the industry. Tobacco companies have preferred to try to avoid scrutiny of their actions and the effects of their actions on smokers and the community more generally. With such a strategy, “winning” involves draining the plaintiff’s resources in preliminary proceedings so that they cannot afford to continue claims to judgement. In the words of one tobacco industry document: “the way we won was not by spending all [the company’s] money, but by making the [plaintiff] spend all his”.[6][7][8]

Such tactics have been adopted in Australia, with the result that, though a number of personal injury claims against the tobacco industry over the harm caused by smoking have been commenced, only one has progressed to trial. One striking example of the use of such tactics was the response by WD & HO Wills (Australia) Ltd, predecessor to British American Tobacco Australia, to a claim for $1000 brought in the Consumer Claims Tribunal of New South Wales by Sarah Hodson. The claimant, a doctor, sought damages for the costs associated with overcoming her addiction to nicotine. Wills, which manufactured the cigarettes that Dr Hodson smoked, challenged the Tribunal’s jurisdiction to hear the claim and the legitimacy of the damages claimed. Wills lost at first instance, appealed, and lost again.[9] Then, before the case went to hearing, Wills’ solicitors hired a private investigator to look into the claimant’s private life.[10]

In its report to the Government released in September 2009, Australia’s Preventative Health Taskforce recommended that the Government should

“5.5 Investigate the feasibility of legal action by governments and others against tobacco companies to recover health and other costs.

5.5.1 Investigate the legal implications of continuing sales of tobacco products and principles that should guide future regulation.

5.5.2 Investigate possible mechanisms for recovery of costs.”[11]

In its response to the Preventative Health Taskforce’s recommendation concerning litigation by government against tobacco companies, in May 2010 the Labor Government stated “The Commonwealth Government notes this recommendation and will keep its legal options open.”

Outline of this chapter

This chapter has three parts. Part One will examine claims against the tobacco industry over the harms of smoking. Those who have followed developments in tobacco control over the last decade will be aware of the multi-million dollar verdicts handed down by US Courts against the tobacco industry and the $206 billion Master Settlement Agreement reached between the US States and the US tobacco industry in 1998.[12] The question may arise why such judgements and settlements have not been replicated in Australia.

Part One attempts to answer this question. Personal injury claims against the tobacco industry share common traits relating to the way that claims are argued and the decisions that courts eventually make. These features make claims against the tobacco industry more difficult to prosecute than ordinary claims over personal injury. Part One will set out these features in order to show why, as at the time of writing, claims brought against tobacco manufacturers in Australia have not been successful. (The only verdict against a tobacco manufacturer in Australia was overturned on appeal—see the discussion of the McCabe case in Attachment 16.1 to this chapter.)

Part Two will provide a brief outline of the other forms which tobacco litigation has taken in Australia. These include litigation initiated by the tobacco industry and litigation other than personal injury claims brought against the tobacco industry. One interesting aspect of litigation involving the tobacco industry is that its tactics tend to be the same regardless of the type of legal claim or the identity of the opposing party. The rules of litigation that are outlined in Part One apply equally to other types of claims. These consistencies mean that tobacco control advocates have to be prepared to invest significant resources into litigation, if they wish ultimately to be successful. Part Two also outlines the rise of litigation funding, which may provide a means by which such resources can be accessed.

Part Three will discuss claims brought against employers and occupiers of public venues over the harms of exposure to secondhand smoke.

[1] Tame v State of New South Wales; Annetts v Australian Stations Pty Ltd (2002) 76 ALJR 1348 at [5] per Gleeson CJ.

[2] Gostin L Public Health Law: Power, Duty, Restraint University of California Press (2003).

[3] R Daynard “Why tobacco litigation?” Tobacco Control 2003;12:1-2.

[4] United States of America v Philip Morris USA Inc et al available at http://www.tobaccolawcenter.org/documents/FinalOpinion.pdf.

[5] M Geyelin M and G Fairclough “Taking a hit: Yes, $145 billion deals a huge blow, but not a killing one”, Wall Street Journal 17 July 2000, A1.

[6] Rabin, R “The Third Wave of Tobacco Tort Litigation” in R Rabin and S Sugarman (eds) Regulating Tobacco, Oxford University Press (2001) 181.

[7] British Columbia v Imperial Tobacco Canada Ltd (2003) 227 DLR (4th) 323, 2003 BCSC 877 (see the “Judicial History” section of a 2005 appeal decision in the same matter, at http://www.canlii.org/en/ca/scc/doc/2005/2005scc49/2005scc49.pdf, p20.

[8] British Columbia v Imperial Tobacco Canada Limited 2008 BCSC 419.

[9] WD & HO Wills (Australia) Ltd v Consumer Claims Tribunal of New South Wales [1998] NSWSC 311.

[10] Watts, K “$150 claim sparked probe”, The Age, 19 April 2002.

[11] Preventative Health Taskforce. Australia: the healthiest country by 2020; National Preventative Health Strategy. Canberra: Commonwealth of Australia, 2009. Available from: http://www.preventativehealth.org.au/internet/preventativehealth/publishing.nsf/Content/national-preventative-health-strategy-1lp

[12] This was preceded by a $40 billion settlement with Minnesota, Mississippi and Texas, so a total figure of $246 billion is often used. See Rabin R L “The Third Wave of Tobacco Tort Litigation” in R Rabin and S Sugarman (eds) Regulating Tobacco, Oxford University Press (2001) 192.