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Accident Compensation Cases

George v Accident Compensation Corporation (ACAA, 26/09/12)

Judgment Text

R Bedford Judge
This appeal concerns a late application for review of a decision dated 6 January 1981, by which the Corporation accepted that the appellant's shoulder condition suffered in 1980 was a complication of his covered shoulder injury suffered on 4 July 1974 and declined to pay earnings related compensation (ERC) because the appellant was not an earner at the date of the original injury. 
The Issues 
The first question for determination as agreed by the parties, is whether the Corporation was correct to decline to extend time on a late application for review? 
The bundle of documents put in at the hearing raises further questions concerning jurisdiction, being first, whether the appellant, through his then lawyer Mr Mirkin, lodged a valid application for review of the primary decision in April 1981. Secondly, if so, whether he effectively abandoned the review application either through Mr Mirkin's subsequent acceptance of the Corporation's position, or on taking further legal advice after Mr Mirkin ceased acting? 
The appellant's position on the substantive appeal is that his shoulder condition should have cover as a stand-alone injury, and he is seeking a finding and a direction that he is entitled to the benefit of a separate claim for cover for the shoulder injury as at March 1980, when he was in employment. 
The Corporation's position is that the only cover available to the appellant is for an injury consequential upon the original injury suffered when he was not in employment, and the shoulder infection does not qualify for separate cover either as a stand alone injury, or as a treatment injury amounting to medical misadventure under the Accident Compensation Act 1972. 
Neither party raised any issue with the decision dated 24 August 1974, in which the Corporation accepted cover for the original injury on 4 August 1974 and declined weekly compensation, but this too is relevant in light of the evidence. 
Background and Medical Evidence 
I have taken the background information from the transcript of evidence at review and the bundle of documents put in for the appeal. As the medical evidence is so brief, I have included it here in chronological order. 
The appellant left school at age 14 years and went to sea for three and a half years, first as a deck boy and then as an ordinary seaman, and the ACC claim form for the 1974 accident confirms that he was working for the Union Steamship Company from May 1971 to January 1974, when he entered Rolleston Detention Centre (Rolleston), and that he received ERC for a work injury in November 1973. He dislocated his right shoulder while playing soccer at Rolleston on 4 August 1974, shortly before his 18th birthday, and the claim was made on 7 August 1974. 
Cover was granted for this injury, but despite having very good knowledge of his earnings history through the ACC form and the previous covered work injury, the Corporation issued a decision on 28 August 1974 that the appellant was not eligible for ERC because he was not an earner at the date of injury and nor could he be considered under s 59. The right of review was given, but was not exercised by the appellant. 
The appellant transferred to Borstal in 1975 and on 12 May 1975, he underwent surgery to his right shoulder to stabilise it and prevent further dislocations. Mr Rothwell carried out a Putti Platt repair, which was apparently successful and uneventful. 
The appellant was released from Borstal in 1976, and he subsequently started work as a painter, having learnt the trade while in Borstal. The appellant suffered recurring dislocations of his left shoulder in 1977 and 1978 and in January 1979, Mr Rothwell performed a Putti Platt repair to his left shoulder. The appellant was cleared to return to work from April 1979. 
On 9 March 1980, after feeling unwell for at least a month, and some weeks after he had commenced a new painting contract, the appellant presented to ca?? at Oamaru Hospital with spontaneous onset of severe right shoulder pain that had suddenly flared up. He was treated with aspirin and a sling and discharged two days later. 
The appellant continued to feel unwell and the pain persisted. He saw Mr Rothwell on 20 March 1980, but this investigation was inconclusive. The appellant was later seen in Mr Rothwell's absence by Mr McMillan, Orthopaedic Surgeon, who diagnosed a septic arthritis of the right shoulder. During an operation performed on 9 July 1980, Mr McMillan found and drained a large abscess with a staphylococci infection in the right shoulder. The appellant was subsequently readmitted with a recurrence of the abscess, which was drained again on 15 August 1980. 
A claim for compensation was made and on 24 September 1980, the Corporation asked Mr Rothwell for a report in respect of the osteomyelitis1
| X |Footnote: 1
Inflammation of the bone as a result of infection; Blacks Medical Dictionary (42nd Edition) 
in the appellant's right shoulder joint (the infection injury). A brief history was given and the area of interest was identified as being the link between the 1975 repair operation and the current medical condition. 
Mr Rothwell replied on 7 October 1980 and I have repeated the letter in full: 
“On 12 May 1975 I carried out a Putti Platt repair for recurrent dislocation of Mr George's right shoulder. As you point out, his original injury was on 4 August 1974. Subsequently I carried out a similar procedure on the left shoulder on 27 January 1979, but early this year he presented with pain in the right shoulder. Investigation at that time was inconclusive, but he presented to Mr McMillan while I was away and this time clearly had a septic arthritis of the right shoulder. He was admitted to Dunedin Hospital on 7.7.80 where drainage was undertaken but had to be re-admitted on 15 August for a further flare up requiring incision of the shoulder and immobilisation … At no stage has any organism been grown from the ‘pus’ although he has been on several courses of antibiotics. In the original repair silk was used and it is not unknown for silk, which of course remains undissolved to precipitate a sterile abscess which normally settles when the offending piece of silk are removed. However this did not occur in Mr George's case. 
I am of the opinion that the silk was responsible for the septic ‘arthritis’ eventually leading to total destruction of the shoulder. ”
On 18 December 1980, Mr McMillan also requested the Corporation cover the appellant's current condition. He gave a detailed medical and work history and noted that the appellant was left with very considerable permanent disability at his right shoulder and as the appellant had only done labouring work in the past, he was obviously going to have difficulty in finding employment in the future. 
Mr McMillan said at page 2 of his report: 
“The original operation on his shoulder was because of recurrent dislocation following an episode of dislocation which may have occurred in the middle of 1974. His shoulder was then symptom free until 1980 when infection developed. The infection would have arisen by organisms carried by the blood stream, but how the organisms got into the blood stream is uncertain …  
I am in no doubt that the organism settled in his right shoulder because the body's resistance here had been reduced by his previous operation. The presence of nonabsorbic sutures here being a persistent foreign body and thus more likely to be the site of aggregation of organisms than normal tissue. I think it most unlikely that the infection had been present since the time of his original operation as almost certainly it would have flared sooner than was the case. 
In summary, therefore this lad suffered a dislocation of his right shoulder probably in mid 1974, this led to recurrent dislocations which necessitated an operation which left him symptom free for six years that a subsequent bacteraemia from an unknown primary site caused infection which in my opinion, would not have settled in his shoulder but for his operation …  ”
On 22 December 1980, the Corporation wrote to Mr Rothwell and advised that having considered his report, it had accepted the current incapacity as a complication of the appellant's injury suffered on 4 August 1974. 
The Corporation received Mr McMillan's report on 24 December 1980, and on 6 January 1981, wrote to the appellant to notify him of its decision to accept cover for the septic arthritis injury. The letter stated that on the information to hand, his claim had been accepted as a complication of the injury he sustained on 4 August 1974, however, as previously advised in the letter dated 28 August 1974, earnings related compensation was not payable as he was not an earner at the date of accident. The letter pointed out that the decision did not affect his entitlement to other compensation. No right of review was given. 
At the Corporation's request, Mr McMillan examined the appellant on 2 April 1981, for the purpose of preparing an assessment under s 119 and s 120 of the 1972 Act. In his report dated 6 April 1981, Mr McMillan recorded a very full history, which is referred to above, and as the balance of the report dealt with the effects of the left and right shoulder dislocation injuries it is not relevant to the present case, except to confirm that the appellant was symptom free in his right shoulder until at least January 1979, and that he did not suffer any infection from the left shoulder Putti Platt repair. 
At some point the appellant took legal advice. On 6 April 1981, his lawyer, Mr Mirkin, wrote to the Corporation and queried the decision of 6 January 1981 not to pay weekly compensation and he provided earnings information and work history details. Mr Mirkin said that he could not understand how the appellant was not entitled to ERC, as when he suffered the further injury in March, this was a result of the previous injury and therefore the second injury also fell within the Act. The appellant was earning approximately $140.00 per week net painting for Mr Bill McGee in Oamaru and he had been promised at least three months work with this particular contract. As result of the injury he had been laid off after completing two week's work. Mr Mirkin also asked for an assessment of lump sum compensation by a particular Dunedin orthopaedic surgeon and for ongoing treatment to be funded by ACC. 
The Corporation's reply of 15 April 1981 addressed the issue of ERC, but did not disclose the reason given in the memorandum of 17 December 1980 for declining to pay ERC, being that the appellant was in Rolleston at the date of the 1974 injury, and misrepresented the appellant's eligibility for consideration under s 59. The case manager (for the Regional Manager) wrote: 
“As Mr George was not an earner at the time of his initial accident on 4 August 1974, and did not have a history of employment to enable an extension of cover under s 59, earnings related compensation was declined. The latest period of incapacity is a recurrence of the injury sustained in 1974 and as such, the same relevant earnings established at the time of the initial injury must be used. ”
Mr Mirkin's request for private medical treatment was declined, and as with the primary decision, no right of review was given. Mr Mirkin wrote to the Corporation again on 28 April 1981. After discussing rehabilitation, he said, in what has remained the appellant's approach on this appeal: 
“The final point we wish to refer to is the question of earnings related compensation. We wish to point out that it is accepted practice and accepted by Case Law before the Review Authority that the infection that resulted from the sutures caused a complication and the complication of itself would not have arisen had it not been for the original accident and the original operation. Accordingly, it is our respectful submission that the problem which resulted from the sutures not dissolving became a further accident in terms of the Accident Compensation Act and as Mr George was an earner at the time this occurred the further accident would be treated as would be treated as covered under the Act and as Mr George was an earner at this stage he would be entitled to earnings related compensation. We are not asking for a reassessment of his earnings related compensation but acceptance that a further accident has taken place. ”
The Corporation re-considered the appellant's claim as demonstrated by the comment at paragraph 2 of the memorandum dated 5 May 1981, and the case officer repeated that paragraph in her letter dated 6 May 1981. After addressing the rehabilitation issues, she said: 
“We refer now to the final point in your letter. As you state, there is substantive case law to the effect that a subsequent infection or complication in medical treatment is held to be the result of the initial injury, even if an extended period of incapacity is resultant. 
A separate claim under the heading of ‘medical misadventure’ would fail because infection is a recognised hazard of such operative treatment. ”
On 27 May 1981, Mr Mirkin wrote to the Corporation. He thanked the Corporation for the letter dated 6 May 1981 “which clarified the issues contained therein” and asked for claim forms for the left shoulder injury, and explained that the appellant had telephoned the Corporation to cancel the left shoulder claim, “as he did not wish this matter to cloud the issues on the right shoulder and wished that matter to be dealt with expeditiously”
The Corporation replied to Mr Mirkin's letter on 3 June 1981, but only discussed the left shoulder injury and rehabilitation. Mr Mirkin's letter in reply, dated 5 June 1981, referred back to the Corporation's letters of 6 May 1981 and 3 June 1981, but again in respect to the left shoulder injury. 
Mr Mirkin then with the firm of Fitch, McKay, Walker & Crush, moved to Dunedin. In his letter to Mr Sara dated 21 May 2012, Mr Mirkin said that as far as he could tell from the file when he read it in 2012, everything was proceeding smoothly until he left and somehow this came to a halt when the claim was passed to a new, junior lawyer. It would appear that the claim for weekly compensation and for the appellant's right shoulder infection to be treated as a separate injury did not proceed any further and the appellant ceased to obtain advice in that matter. 
It is clear that the Corporation was not contacted by the new lawyer to prompt action on the right shoulder claim, as on 17 August 1981, unaware that he had left the firm, the Regional Manager wrote to Mr Mirkin at Fitch, McKay, Walker & Crush to advise that the Corporation had assessed the appellant's lump sum compensation for his injuries received in the accident on 4 August 1974, and that decision notices under ss 119 and 120 were enclosed. 
The next interaction with the Corporation was in February 1982, when, following a home visit to the appellant, the rehabilitation officer reported to the Regional Manager that he had returned to his trade as a painter and was coping reasonably well. Accordingly, the file was closed. 
The appellant made a claim for cover for a fresh right shoulder injury in March 1984, when he was employed as a freezing worker, and the cause of accident was described as “old [septic] arthritis of right shoulder”. The Corporation accepted the claim as “PIBA to a pre-existing injury” and ERC was paid for a period based on medical certificates certifying to a “recurrence of previous shoulder injury” which were issued in 1985, and which the Corporation related back to the 1984 injury. 
In July 1993 the appellant made another claim and the Corporation reviewed his accident history. Claim number 88.75.413794 was treated as the original injury for all three right shoulder injury claims and the covered accidents of 23 March 1984 and the claim lodged in July 1993 were amalgamated with this claim and classed as “continuations”, although they had been up to that time treated as separate events. 
On 20 September 1993, Mr McMillan wrote to the appellant and confirmed his 1981 opinion “ … that the subsequent infection was a consequence of treatment for the recurrent dislocation of the shoulder you developed and thus the infection and its consequences should be covered under the Act.” 
The appellant remained off work from 1993, and as weekly compensation was being paid, he took no further action with respect to the septic arthritis injury claim. However, in 2009, weekly compensation was stopped following the decision of the District Court in Giltrap (141/09) and the appellant sought a review. The Reviewer applied the competing decision of Vandy (23/10) and quashed the Corporation's decision. 
The Corporation appealed the Vandy decision and to protect the appellant's position in the event that the High Court did not uphold the reasoning in Vandy Mr Sara lodged a late application for review of the Corporation's decision of 6 January 1981, by way of a letter dated 14 May 2010. The grounds stated were that ACC was wrong in fact and in law to determine that the appellant was not entitled to weekly compensation in respect of the additional injury and new incapacity arising from what would now be termed a treatment injury and a determination was sought that the appellant was an earner as at the date of his additional injury. 
On 22 July 2010, the Corporation issued the decision declining the late application for review on the grounds of delay and the reason given for that delay, the medical information stated there was a clear link between the injury, the surgery and the infection, and there was prejudice to ACC because it could not determine the date of injury given that the infection occurred some 29 years ago. 
The application went on review, and in his decision issued on 20 December 2010, Mr Greene, applying McDougall, upheld the Corporation's decision to decline the late application for review as the strengths and merits of the case were not sufficient, there was an inordinate delay, the reasons for the delay did not tilt the scales in the appellant's favour and there would be some prejudice to the Corporation. It followed that he had to decline jurisdiction on the substantive issue concerning the challenge to the primary decision of 6 January 1981. 
The Appeal 
Case for the Appellant 
Mr Sara accepted that the principles applying to late applications for reviews (and appeals) were as set out in McDougall. He accepted that the delay in this case of about 30 years from the date of the primary decision was inordinate, but he explained the delay by the fact that weekly compensation was being paid until the Corporation's decision of 9 June 2009 so the appeal was brought only as a matter of necessity. Mr Sara did not suggest that Mr Mirkin's letter of 28 April 1981 could be a treated as an application for review, and he explained Mr Merkin's failure, as a “competent and experienced counsel” to lodge a review application as being attributable to him leaving the firm and the appellant's file being passed to a junior lawyer. 
The real issue to be determined, Mr Sara submitted, was the strengths or merits of the appellant's case. The question was, whether the Corporation was correct to merge the shoulder infection with the original dislocation injury in 1974? 
Mr Sara accepted that there was no doubt that there was a causal connection between the original accident in 1974 and the treatment for that and the development of the infection in 1980, but said it was wrong in law for the Corporation to determine that the appellant has had only one accident, in 1974. This had to fail as a matter of fact, as there is no way that the bone infection could be a “recurrence” of the original dislocation injury, as a bone infection is an entirely different matter. The dislocation injury did not cause the infection, the silk sutures used in the 1975 operation did, and legal causation should not be conflated with actual causation in such a way as to deprive a person of the benefit of cover for discrete conditions. 
Mr Sara submitted that the 1972 Act bore scant resemblance to the current regime, particularly in regard to the broad definition of ‘personal injury by accident’ and there was no provision in the 1972 Act, with some exceptions, that require the date of accident to be fixed for cover purposes. However, the infection would amount to a new injury under s 20(2)(d) of the Accident Compensation Act 2001, and be treated as an injury in its own right as distinct from the personal injury for which the person had cover. 
Mr Sara said that the correct focus on incapacity under the 1972 Act was exemplified by s 67, which provides a deemed date of accident for people with cover for disease due to the nature of employment, the date being the commencement of the period of incapacity. Mr Sara accepted that s 67 cannot apply, but stressed the different dates of the dislocating injury and the bone infection, and that the normal expectation of a dislocation injury is not an abscess, such as suffered by the appellant. The 1975 surgery was an intervening event, and if a date of accident had to be picked, then in fairness to the appellant, it should be the date of incapacity to earn in March 1980. Mr Sara did not argue for medical mishap, but for a “notional date of injury” in line with s 67, which would overcome the technical difficulty of identifying an actual date of injury. 
Regarding prejudice to the Corporation, Mr Sara submitted that there was not a lot of merit in the Corporation's claim of prejudice, as if the decision was patently wrong, then it was always wrong and the moral force was with the appellant. There was no prejudice regarding relevant earnings, because this could be settled by reference to the award. The medical records were all available and a substantial entitlement was at stake. 
Case for the Corporation 
Mr Barnett noted Mr Mirkin's letter of 28 April 1981 and submitted that he had contended that in effect, there was a new accident as a separate injury. The Corporation's reply of 6 May 1981 restated the position that the infection was a complication of the original injury and advised that a claim for medical misadventure would also fail because infection is a recognised hazard of the treatment. Mr Mirkin's letter of 27 May 1981 suggested that he had accepted the Corporation's stated decision; an application for review was not filed before Mr Mirkin was still acting some five months later, and the appellant gave evidence at the review hearing that he was advised that he was not entitled to earnings compensation but was advised to pursue the lump sums. 
Mr Barnett submitted that the fact that the appellant had legal advice at the material time was an aggravating factor, and if the new solicitor failed to attend to the claim and lodge a review application, then that of itself was not a satisfactory explanation of the delay and the overall considerations of justice applied to both parties. 
Mr Barnett was also critical of the reasons for the late application for review, particularly as the purpose did not go to the merits of the decision, but a secondary purpose, being to establish a date of accident when the appellant was an earner and by this means avoid the effect of the Giltrap decision, now upheld by the High Court in Vandy. It was quite wrong, he submitted, that a decision in 1981 assessed on its merits by the appellant's solicitor at the time, could be permitted a review 29 years later. None of the usual mitigating factors applied, and this was a case of a decision ultimately accepted at the time on its merits, now being challenged for an ancillary purpose. 
Regarding prejudice, Mr Barnett argued that the Corporation was prejudiced in establishing a date of injury, if the infection injury was to be treated as a separate accident, and the date of accident was relevant because to obtain the entitlement to ERC under the 1972 Act, the appellant must be an earner at the date of injury. In addition, the Corporation would be prejudiced in investigating such a claim, as it would need earnings information from the date of injury to establish “relevant earnings”
Mr Barnett's discussion of the merits expanded on this aspect, as the major problem he identified was the fact that the new physical injury did not manifest itself until five years after the surgery, which he identified as the only other possible cause of the injury. The fact that the infection was different in nature to the original injury was, he submitted, immaterial. The language of the 1972 Act was not complicated, and the definition of “personal injury by accident” was broad, and deliberately so. Just as a mental consequence is different in nature to an original injury, here the infection was a physical consequence of the surgery for the original injury, therefore it was a physical consequence of the original injury, and covered accordingly. 
The only way that the infection injury could amount to a separate injury was through the intervention of another event, which in this case can only be the surgery; this would give 1975 as the date of accident and again, would not assist the appellant. The infection itself could not be another accident and injury, as infection is not covered, if caused exclusively by disease, and once again, this would raise an issue with identifying the date of injury, as there was no evidence to say when the disease arose. 
According to Mr Barnett, cover for the infection injury as a physical consequence of the original injury was the only way it fitted into the scheme as a covered injury. A treatment injury would not work because the infection was a known hazard of the operation, and thus medical mishap would not arise. There was no identifiable accident, no novation, and a spontaneous emergence of infection was excluded. And ultimately, there was no identifiable date of injury, unless the infection was a consequence of the original injury. 
In summary, Mr Barnett said, a wide definition of “personal injury by accident” does not require that there to be a separate identifiable accident to ensure that the shoulder infection is covered as part and parcel of the physical injury suffered in 1974. The intention was to cover all consequences of a covered injury, and obviate the need to identify a separate injury by accident. In any event, a separate accident cannot be identified, and injury consequent upon treatment that is not a medical misadventure, is not covered. 
Section 2(a) of the 1972 Act defines “personal injury by accident” as including: 
The physical and mental consequences of any such injury or of the accident and 
Medical, surgical, dental, or first aid misadventure. 
Section 2(b)(ii) excludes from cover damage to the body or mind caused exclusively by disease, infection, or the ageing process. 
Section 55(1) provides that all persons who suffer personal injury by accident in New Zealand and are earners at the time of the accident shall have cover in respect of accident under the earner's scheme. 
Section 59(1) extends the earner's scheme in any case where a person has had cover under the earner's scheme in respect of personal injury by accident and provides that where cover would, but for this section, have ceased, that cover shall be deemed to extend to personal injury by accident during the period or periods specified in subs (2) of this section. 
Section 59(2) provides that the period or periods deemed to be so extended shall be a period not exceeding 13 weeks, which period shall be the seven days after the day on which his cover would, but for this section, have ceased, plus a further seven 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. 
There is a proviso to subs (2) that provides the Corporation the discretion to determine that cover shall be deemed to extend for such further period, if any, as the Corporation 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. 
Section 129(c) provides that the Corporation may in its discretion reduce, postpone, or cancel payments of earnings related compensation to any person in respect of any period during which the person is being maintained, otherwise than at his own expense, in any penal institution as defined in s 2 of the Penal Institutions Act 1954. Under subs (d), this applies also to any other qualifying institution. 
I have included details of the appellant's circumstances as at the date of the original injury on 4 August 1974 and the Corporation's decision concerning cover in the background information, because it seems to me that this is highly relevant to the issues for determination. 
In 1974, the Corporation decided not to investigate the appellant's possible extension of earner status under s 59, solely because he was in a penal institution at the date of the shoulder dislocation accident and effectively denied him any chance at future ERC, no matter how incapacitated he may become in the future as a consequence of the injury. 
The Corporation held the necessary information, which it did not disclose in its decision, and nor did it disclose the real reason for declining to consider an extension of cover under the earner's scheme at a time when, given the appellant's age and circumstances, it would have been appropriate to consider extending the statutory 13 weeks period to enable the appellant to qualify for ERC on his release from Borstal, should the shoulder injury subsequently cause any incapacity to earn. To do otherwise had the potential to create the very situation we are now dealing with, and it seems an arbitrary and extreme outcome for the appellant to have been denied consideration of cover under the earner's scheme, as an additional sentence imposed by ACC for his teenage offending. 
The Corporation's understanding of the meaning of s 59 (as later evidenced in the memorandum of 18 December 1980) was simply wrong. The section does not deny cover under the earner's scheme to incarcerated persons; it only provides the means for not paying ERC while the person is incarcerated and it should not have been applied to disentitle the appellant from the consideration to which he was entitled as a long term, permanent employee in the 12 months prior to his injury. 
After the appellant made the claim for the infection injury in 1980, the Corporation re-looked at the decision of 28 August 1974 and this should have prompted a proper consideration of his possible entitlement under s 59(2). The Corporation chose not to do this, and in the process, implicitly misled the appellant in the decision letter of 6 January 1981 by explaining the 1974 decision by reference only to him not being an earner at the date of accident. It then expressly misled Mr Mirkin in the letter of 15 April 1981, by saying that the appellant did not have a history of employment to enable an extension under s 59, when clearly, the Corporation knew, through the 1973 claim for ERC and the claim form for the 1974 accident, that he did. 
It may be that had the correct information been given to Mr Mirkin, he would have made a late application for review of the 1974 decision letter, but he apparently accepted the Corporation's misinformation at face value, and only challenged the decision that the infection injury was a recurrence, or a complication, of the 1974 injury - the appellant was employed at the date of his incapacity and thus a separate accident would overcome the difficulty with tying the appellant's cover to an earlier accident date that denied him ERC. 

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