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Accident Compensation Cases

Stuart v Accident Compensation Corporation (ACAA, 18/12/07)

Judgment Text

DECISION 
P J Cartwright
[1]
The issues in this appeal arise from the decision of Mr J Greene reviewer, dated 27 July 2007, in particular: 
[a]
Whether the respondent was correct to decline the late application for review; 
[b]
Whether the reviewer's decision to confirm that the respondent had correctly exercised its discretion under s 116(5) of the 1972 Act was correct. 
Background 
[2]
On 9 December 1981 the appellant broke his neck while he was an inmate at the Invercargill Youth Institution where he was serving an 18 month prison sentence for manslaughter. 
[3]
The appellant was then 17 years of age. 
[4]
As a result of the accident the appellant suffered paraplegia. 
[5]
An application for earnings related compensation was made on the appellant's behalf by his father. 
[6]
This was declined by a written decision dated 23 September 1982 on the basis that the appellant was not an earner at the date of the accident and did not qualify for an extension of cover under s 59 of the Act. 
[7]
An application for review was lodged in respect of this decision which, following a review hearing, resulted in a decision dated 23 June 1982 that the appellant was entitled to an extension of cover under s 59. 
[8]
Following the decision of Mr R A Ayton, the file was referred back to the respondent for implementation and a formal assessment of earnings related compensation was issued on 17 July 1982 backdated to 27 April 1982. 
[9]
The calculation of earnings related compensation is set out in the form C62 of that date and records that the gross weekly compensation was based on 12 months' earnings of $7,281.23 which produced an average weekly earnings figure of $140.03 per week. Eighty percent of that figure produced $112.03 and this formed the basis of the appellant's earnings related compensation thereafter. 
[10]
It is common ground that the appellant's work history which was taken into account in determining earnings related compensation was as follows: 
[a]
5 July 1979 (68 days) Auto Court Car Sales 
[b]
12 September 1979 — 19 April 1980 (220 days) unemployed 
[c]
20 April 1980 — 4 May 1980 (14 days) seasonal work NZ Apple & Pear Board 
[d]
5 May 1980 — 10 March 1981 (278 days) construction worker for Naylor Love Construction. 
[11]
Following this assessment the appellant's former counsel, Mr J B Robertson, wrote to the respondent on 13 August 1982 enquiring as to the composition of the earnings related compensation calculation and the respondent replied by letter dated 18 August 1982. It transpired that the earnings which were taken into account were the earnings from the New Zealand Apple & Pear Board amounting to $237.71 and from Naylor Love Construction amounting to $7,043.52. 
[12]
There were no further communications between Mr Robertson and the respondent regarding weekly compensation. 
[13]
Following Mr Sara's involvement from March 2006, an enquiry was commenced as to the basis of the appellant's weekly compensation entitlement. 
[14]
By letter dated 4 August 2006, the respondent was asked, inter alia, to supply a printout showing the base relevant earnings figure upon which the weekly compensation was based, together with all increases from time to time thereon. 
[15]
This was duly supplied and it was then noted that the adult minimum rate did not apply to the appellant. 
[16]
When asked why this was so, the respondent replied by letter dated 28 August 2006. In relation to the minimum rate issue it stated: 
“ACC did not accept that the provisions of s 116 were satisfied so as to deem Mr Stuart to be a full time worker for the purposes of increased compensation. This would have been based on Mr Stuart not having been in paid employment for at least 35 hours per week throughout the 12 months before his accident, not working in paid employment for at least 35 hours per week at the time of his accident, and there being no special circumstances at or about the time of the accident that would allow a determination to regard him as a full time worker. ”
[17]
The respondent was then asked to supply a copy of the document which contained the determination or decision where s 116 of the Act was specifically dealt with. 
[18]
The respondent advised by letter dated 7 August 2006 that there was no specific document relating to a determination under s 116. 
[19]
The respondent was then asked to supply the first document which reflected the non-application of s 116 and this was supplied under cover of a letter dated 15 September 2006. The document which contained this information was a C62 form dated 17 July 1982. 
[20]
This document was treated as a formal decision carrying review rights and an application for review in respect of the non-application of s 116 was communicated to the respondent by letter dated 17 January 2007. 
[21]
The respondent declined to grant leave to extend time for the late application for review and this itself was the subject of an application for review. 
[22]
Both matters proceeded to a review hearing on 30 May 2007 before Mr John Greene. 
[23]
The appellant did not attend the hearing but instead provided a signed statement of evidence. The summary of that evidence as recorded by Mr Greene follows: 
“Around July 2006 he received a letter from ACC to do with the calculation of his weekly compensation. That document contained information about the youth rates as well as the adult minimum wage and it contained information he had not seen before. He therefore asked Mr Sara to investigate whether he was receiving his proper entitlement. ”
[24]
Only after Mr Sara commenced investigations was he aware that he was not receiving the benefit of the adult mimum wage equivalent contained in the legislation. ACC had never advised him formally that it had to issue a determination to that effect. 
[25]
While Mr Robertson was acting for him in relation to ACC matters, the only time he ever met with him was during his criminal trial. He could not recall how he continued to be involved with ACC matters. He might have received instructions from his parents but he could not recall those circumstances. At no stage did Mr Robertson ever tell him that ACC had made its determination concerning s 116 of the Act. 
[26]
The reviewer then dealt with the out of time issue and found that the strengths or merits of the matter was the predominant factor. 
[27]
In relation to the substantive issue concerning the exercise of the respondent's discretion under s 116, Mr Greene found that the respondent's file memoranda dated 12 and 15 March 1982 provided evidence that the respondent had turned its mind to s 116(5)(a). 
[28]
Mr Greene then turned to consider whether ACC had exercised its discretion properly. 
[29]
Mr Greene dealt with that aspect as follows: 
“The exercise of a statutory discretion was the subject of recent discussion by Judge Ongley in Herlihy (196/06). It is not sufficient to show that the discretion could have been exercised differently. Rather, what must be shown is that ACC did not take into account something it should have, or that it took into account something it should not have, or that the decision was simply wrong. 
Having found on a probability basis that ACC did make enquiries relevant to the exercise of its discretion under s 116, there is no persuasive evidence that it erred by failing to exercise that discretion in Mr Start's favour. It was for ACC to determine such a period before the date of the accident Mr Stuart worked as an earner in paid employment for an average of at least 35 hours a week. He had not worked between 10 March 1982 up to the date of his injury on 9 December 1981. Against that factual background, I am not persuaded that ACC erred by failing to deem him to be a full time worker. Further, having regard to his work history and to any special circumstances, I am not persuaded that ACC erred in relation to s 116(5)(c). 
On this important issue, I therefore find there were no strengths or merits that should require ACC to accept the late application. ”
Grounds of Appeal 
[30]
The grounds of appeal are that: 
[a]
The decision of the review officer is wrong in fact and in law; 
[b]
The review officer erred in law in declining the late application for review; 
[c]
The review officer erred in law in failing to award earnings related compensation under ss 59 and 116 of the Accident Compensation Act 1972. 
Issues 
[31]
The issues to be determined in this appeal are as follows: 
[a]
Did the respondent in fact exercise its discretion under 116, and if so, 
[b]
Did the respondent exercise that discretion properly 
The Law 
[32]
The two statutory provisions involved in this case are s 59 and 116 of the 1972 Act. Section 59(2) provides as follows: 
“ … (2) Subject to subsection (3) of this section, the period or periods during which the cover of any person under the earners scheme in respect of personal injury by accident shall be deemed to have so extended shall be a period not exceeding 13 weeks, which period shall be the 7 days after the day on which his cover under the earners scheme would, but for this section, have ceased, plus a further 7 days for each complete 30 days, if any, during the 12 months immediately before the day on which that cover would, but for this section, have ceased, whether or not that cover was continuous; 
Provided that the Commission may in its discretion determine that the cover shall be deemed to extend for such further period (if any) as the Commission considers reasonable, having regard to that person's employment history, state of health, and age, and to the circumstances under which he ceased to be an earner. ”
[33]
Section 116(5) provides: 
“ … For the purposes of this section, an earner shall be deemed to be a full time worker only if — 
(b)
He has, throughout such period before the date of the accident as the Commissioner may determine, worked as an earner in paid employment for an average of at least 35 hours a week; or 
(c)
The Commission is satisfied that he was, at the time of the accident, working in employment which would have required him to work in paid employment for an average of at least 35 hours a week, and that he would have continued in such employment if the accident had not occurred; or 
(d)
The Commission, after having regard to the work history of the earner and to any special circumstances which may exist at or about the time of the accident, determines that the earner shall be regarded as a full time worker for the purposes of this section. ”
Submissions for Appellant 
Mr Sara submitted: 
[34]
It is common ground that but for the remedial provisions of s 59 of the Act, the appellant would not be entitled to earnings related compensation. In that Act the expression used was “cover under Earners Scheme”. Section 59(2) allowed the then Commission to extend cover under the Earners Scheme to injured persons not otherwise entitled to that cover. This subsection allowed extension for cover beyond the expiry of entitlement for a further 13 weeks but the proviso to that subsection enabled the Commission in its discretion to determine that cover be deemed to extend for such further period as the Commission considered reasonable, having regard to the injured person's employment history, state of health, and age and to the circumstances under which he ceased to be an earner. 
[35]
The respondent declined to exercise its discretion in the appellant's favour applying this proviso and this was overturned by the review officer Mr Ayton who must have found that the respondent had not exercised its discretion properly. 
[36]
Section 116 similarly provides a remedial outcome for injured claimants on low earnings so that in certain circumstances their earnings related compensation could be increased to the statutory prescribed minimum rate. 
[37]
It is common ground that the appellant's weekly compensation currently is based on relevant earnings as originally determined rather than by applying s 116 to bring his earnings related compensation up to the minimum rate. 
[38]
A determination on this substantive issue, that is, whether the respondent was correct to deprive the appellant of the benefit of s 116, will itself determine the leave issue. 
[39]
The reviewer's finding that the ACC memoranda dated 12 and 15 March 1982 were generated in connection with the respondent's consideration under s 116 is manifestly incorrect. On the evidence, the only issue the respondent was addressing at that time was the issue of extension of cover under s 59. 
[40]
The claims supervisor Mr Woodward asked the claims officer to obtain further information about three matters, the last of which was concerning the appellant's employment with Naylor Love Construction. Specifically the information sought concerned the appellant's work history including any absenteeism, the appellant's reliability and the security of his tenure. 
[41]
The memorandum dated 15 March 1982 was the follow-up to the earlier one recording the results of the enquiries made. 
[42]
In its submissions to the reviewer, the respondent was clear that the decision letter dated 23 March 1982 declined entitlement to weekly compensation to the appellant on the basis that the appellant was not an earner at the date of the accident and did not qualify for an extension under s 59 of the Act. 
[43]
At paragraph 2.5 of its submissions, the respondent goes on to say that the review decision on 23 June 1982 found that the extension of cover under s 59 should apply. 
[44]
Apart from these matters, Mr Greene must be incorrect concerning the status of the two memoranda, because before any consideration could be given under s 116, the appellant would first need to get in the door as an earner under s 59. Plainly, on the evidence, the memoranda and all the investigations and considerations up to its decision of 23 March 1982 were confined to the extension of cover issue under s 59. 
[45]
On the facts, Mr Greene's finding that the respondent did not exercise its discretion under 2.116 is not supported by the evidence. 
[46]
However, that is not to say that the information contained in the file memoranda under consideration is not relevant for the purposes of s 116: the plain fact of the matter is that it was not considered in that context and for that purpose. 
[47]
It follows that if the respondent did not exercise its discretion, then it can hardly be said that it exercised its discretion properly. 
[48]
Applying the general principles in a pertinent extract from “Judicial Review A New Zealand Perspective” Supplement to the First Edition by GDS Taylor at paragraph 14.42A (supplied by Mr Sara) to the facts of this case, it emerges that the decision not to bring the appellant's earnings related compensation up to the mimum rate can be impeached on the grounds that it is arbitrary and unreasonable. 
[49]
It appears that an attempt was made to show that the respondent had exercised its discretion but this only appears in correspondence passing between counsel and the respondent after the matter was raised. Certainly it is the case that the matters raised by Mr Wilson for the respondent were matters that should have been considered by the respondent in 1982. But they were not. 
[50]
It becomes necessary to consider in detail what matters the respondent was required to consider in exercising its discretion under s 116(5) of the Act. 
[51]
It is to be noted that the three sub-sections are alternatives. 
[52]
At the review hearing, the respondent argued that the actual date of injury must be used under s 116(5) and that this in turn obliges the respondent to work backwards from the actual accident date to determine his earnings history. However, s 116(5)(a) provides the respondent with a discretion to determine any period before the date of the accident. This is made clear by the words “throughout such period before the date of the accident as the Commission may determine.” 
[53]
It follows that the respondent has a wide discretion to fix on any such period as it may determine for the purposes of s 116. 
[54]
As to how the respondent should have exercised its discretion under s 116(5), the conduct of the respondent following the review officer's decision date 1 July 1982 is highly relevant. Once Mr Ayton had found that the appellant was entitled to the benefit of the proviso to s 59(2) of the Act, the respondent's approach thereafter was to focus on the earnings history prior to the date the appellant last worked, rather than prior to the date of his accident. 
[55]
The respondent then fixed the appellant's relevant earnings on the basis of 12 months prior to the date he last worked, not prior to the date of his accident. 
[56]
It was unreasonable and irrational for the respondent to fix on another period, that is from the date the appellant last worked until the date of his accident, in order to determine whether he was working as an earner in paid employment for an average of at least 35 hours per week. 
[57]
While it is the case that the Act does not require that s 59 and s 116 be read together, a proper exercise of the discretion under s 116(5) requires that this in fact be done in the particular circumstances of this case. That means that having found that the appellant was entitled to extension to cover under s 59 (as directed by the review officer Mr Ayton), and having worked out the appellant's relevant earnings on the basis of the last worked date rather than the date of accident, this approach should have been followed through when exercising its discretion under s 116(5). 
[58]
There is a clear failure by the respondent to exercise its discretion concerning s 116 in a proper way. 
[59]
In conclusion Mr Sara submitted that the appellant was entitled in fact and in law to the remedial provisions of s 116 so that his earnings related compensation should be increased to the minimum rate as determined under s 116(2)(a) of the Act. In Mr Sara's view it follows that this appeal should be allowed and the respondent directed to recalculate the appellant's weekly compensation on the basis that he is entitled to the minimum rate from the beginning. 
Decision 
[60]
Having given careful consideration to the submissions of both counsel the Authority finds the submissions of counsel for the respondent to be more compelling. Those submissions are incorporated in the Authority's decision to dismiss the appeal, which follows. 
[61]
The first issue in this appeal is whether the application for review should be accepted out of time. In this case, the delay in filing the application for review was one of 24 and a half years. However, it is accepted that the principal factor in determining whether a late application should be accepted, concerns the merits of the case. Those merits are not to be addressed in isolation, but must also take into account any difficulties there may be, from the perspective of the respondent as well, in dealing with a challenge to a decision made many years beforehand. 
[62]
The respondent's position had been that no significant prejudice has been caused to it however, the focus with which the appeal is now pursued — specifically, the detailed focus on the contention that the respondent had failed to exercise its discretion under s 116 at all — requires that issue to be reviewed, as well as the substantive merits of the appeal. 
[63]
The McDougall factors are addressed in the review decision. The length of delay has already been mentioned. The reasons for delay, the second of the factors referred to in McDougall, are the appellant's explanation that he and his then counsel, Mr Robertson, were unaware of the provisions of s 116 of the 1972 Act and that he had only become aware of them when present counsel had begun acting for him. 
[64]
As to this, the reviewer noted that the fact that the appellant had been represented by counsel following which, pursuant to a review of the s 59 decision, ERC entitlements were obtained. 
[65]
It is common ground that following the respondent's decision not to exercise its discretion, under s 59, in the appellant's favour this was overturned by a review officer in a very brief decision dated 23 June 1982 which simply concluded that the discretion should be exercised. This decision itself provided no assistance as to any enquiry there might be as to the application of s 116(5). 
[66]
It is also agreed that the appellant's current weekly compensation is based on the original relevant earnings determination, rather than by any application of s 116(5), which would have the effect of bringing the ERC up to the minimum rate. 
[67]
The reviewer also noted that the calculations had been queried following the grant of ERC, by appellant's then counsel. 
[68]
Mr Hunt outlined the particular sequence of relevant correspondence and noted that no further correspondence ensued. Mr Hunt explained there was no challenge in correspondence to these calculations and there was no review application. 
[69]
When Mr Sara sought details of the respondent's 17 July 1982 decision, he specifically requested documents relating to any determination where s 116 of the 1972 Act had been specifically dealt with, presuming in his request that such documents must exist. However, the respondent's position was (and is) that while there had been no specific documentation in terms of that request, as framed by counsel, the normal practice had been (and still is) to consider all such relevant provisions before arriving at decisions on entitlement. In other words, the respondent's position is that in making a reviewable decision as to entitlements, the respondent did take into account all relevant factors. 
[70]
This was the conclusion that the reviewer also reached with, the Authority agrees, good grounds for having done so. 
[71]
As Mr Sara acknowledges, while various memoranda in early 1982, e.g. 12, 15 and 22 March, were all relevant to the assessment the respondent was undertaking pursuant to s 59, they were also relevant to, at least, the provisions of s 116(5)(a) and (c) as well. What is not accepted, the Authority finds, is the appellant's submission that because no distinct piece of paper can be located on the respondent's file explaining how the provisions of s 116 had been considered, it therefore must follow that those provisions were never considered by the respondent in reaching its decision on 17 July 1982; particularly in light of the fact that the respondent's calculations were queried, and answers provided which explained this decision and from which, the Authority agrees, it is clear that the s 116(5) criteria were applied. 
[72]
The appellant's argument proceeds on the basis that because there is no paper trail showing that s 116(5) had been considered, it must therefore follow that the decision was made without reference to that provision. On this basis, it is then submitted (as per paragraph 5.15) that the decision not to bring the appellant's ERC up to the minimum rate is impeachable on the grounds of it having been arbitrary and unreasonable — this because there is no evidence of a reasoning process having been employed. 
[73]
The Authority finds the difficulty with this submission is that, in fact, there is a decision dated 17 July 1982 which has been made, and which was capable of being challenged by way of review 24 years ago. 
[74]
The Authority agreed there is an important distinction to be made between a decision which, on analysis, can arguably be shown to have been arbitrary and unreasonable on the basis that no reasonable decision maker could ever have made it, and a decision which is alleged to have been arbitrary and unreasonable on the basis that no reasoning process was employed before the decision was reached. 
[75]
The latter is the first argument that the appellant puts forward, but in reality the only argument that was ever able to be raised in respect of the respondent's decision was that the decision was arbitrary, unreasonable and irrational on the basis that no reasonable decision maker in the respondent's position could, having taken into account the provisions of s 116(5), have made it. 
[76]
The respondent's position was succinctly put by Mr Wilson when he confirmed that no specific documentation relating to a determination under s 116 existed, but that it was normal practice for the respondent to consider all such provisions before arriving at any decision on entitlement, as is still the case. 
[77]
As to s 116, it is common ground that the three sub-sections are discrete alternatives. Each has to be considered separately. 
[78]
At paragraph 5.20, the appellant submits that at review the respondent had argued that the actual date of injury must be used under s 116(5), and that this in turn obliges the respondent to work backwards from the actual accident date to determine the earnings history. It is not clear where in the respondent's submissions such an assertion is actually advanced. In paragraph 4.2 of respondent's submissions at review, it was said that: 
“While it is arguable that s 116(5)(a) could apply as relevant earnings have essentially been calculated as if the last date of employment was the date of accident, and having used the provisions of s 104 for relevant earnings, as if the date of injury occurred on 10 March 1981, it would appear consistent to use this date for determining whether the claimant was a full time earner under s 116(5). In that case, s 116(5)(a) would apply. ”
[79]
This was not a submission which contended that the respondent was obliged to work backwards from the actual accident date to determine an earnings history. It is a submission that is consistent with the position that the appellant and respondent both agree on, namely that in terms of s 116(5)(a), there is a wide discretion with the respondent to fix “such period before the date of the accident as the Commission may determine”. This can be any period, so long as it is before the date of the accident itself. 
[80]
The appellant then contends that in the particular circumstances of the case, what the respondent should have done was to use the same period for the purposes of s 116(5)(a) as it had in terms of s 59(2) i.e. 12 months prior to the date the appellant last worked. 
[81]
However, it is clear on the facts that to have utilised this period would not have provided an outcome which would have deemed the appellant to be a full time worker. That is because over the 12 months prior to March 1981, the appellant did not work in paid employment for an average of at least 35 hours a week, having worked over a period of 292 days in the 12 months prior to 10 March 1982. 
[82]
The second sub-section, s 116(5)(b), does not and could not apply as for obvious reasons the respondent could never have been satisfied that “at the time of the accident” the appellant was working in employment that required him to work for an average of at least 35 hours a week. 
[83]
That would leave for consideration the provisions of s 116(5)(c) which is a provision that provides the respondent with a discretion having regard to the work history of the earner and to any special circumstances which may exist “at or about the time of the accident” to determine to regard the appellant as a full time worker. 
[84]
The date of the accident is relevant for this assessment, and the assessment itself is a discretionary one, meaning that if it were to be challenged, the appellant would have to show that the decision could be impugned on the usual grounds on which discretionary decisions may be challenged i.e. that it was made having regard to irrelevant considerations, on a wrong principle, or was plainly wrong. It is extremely difficult to see how the appellant could argue that a decision not to determine the appellant to have been a full time worker given the work history he had, was wrong. This is a further reason why the respondent's submission is upheld that the appellant has failed to show that the respondent did not exercise the discretion it had under s 116(5)(c) in a proper way. 
[85]
As to the “special circumstances” element of s 116(5(c), the respondent did not find that there were special circumstances which required it to take the view, in conjunction with the appellant's work history, that it should determine him to be a full time worker. In particular the respondent did not consider the circumstances of a manslaughter conviction and imprisonment to constitute “special circumstances” for the purpose of this sub-section. 
[86]
The appellant does not seek to advance any contention to the contrary, and it does appear that the appellant's primary focus is upon s 116(5)(a). 
[87]
The flaw in the appellant's argument is maintained into the conclusion, and the relief sought. The appellant submits he was entitled to the benefit of the remedial provisions of s 116 so as to increase his ERC to the minimum rate under s 116(2)(a) of the Act. 
[88]
But even allowing for the argument that the respondent should have used the same period of time (i.e. the 12 months prior to the date of cessation of work) the appellant would not have been able to establish that he worked as an earner in paid employment for an average of at least 35 hours a week (in terms of s 116(5)(a)); and if regard is had to s 116(5)(c), the appellant's task is to show that the respondent exercised its discretion in some legally inappropriate way, which he has not done. 
[89]
It follows that the appeal should be dismissed. 
[90]
The Authority is indebted to both counsel for their very helpful submissions and in particular, the Authority would like the appellant to be aware that his counsel provided the Authority with very full and substantial submissions which covered every possible aspect of the law and that it was through no lack of diligence on his part that his appeal has been unsuccessful. 
[91]
The appeal is dismissed. 

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