Skip to Content, Skip to Navigation

Safeguard OSH Solutions - Thomson Reuters

Safeguard OSH Solutions - Thomson Reuters

Accident Compensation Cases

Chalecki v Accident Compensation Corporation (ACAA, 04/02/15)

Judgment Text

D J Plunkett Member
This is an appeal by Edmund Chalecki against the decision of a review officer on 22 October 2013. 
Mr Chalecki injured his back working as a builder more than 30 years ago. At the time of his injury, he had a small hobby farm running pigs. He was unable to work effectively as a builder after the accident, so he received earnings-related compensation from the respondent Corporation. Accordingly, he built up the farm as the appropriate form of rehabilitation in order to become independent of the Corporation. 
A self-employment grant from the Corporation was sought. While this was eventually declined, Mr Chalecki put considerable money into the farm, even buying a bigger farm in an attempt to become self-sufficient. He was never able to do so and incurred considerable expenses and losses in his attempt to become self-sufficient. He now seeks to recover those costs or losses, or at the very least the self-employment grant to which he says he is entitled. 
The essential issues for me are whether Mr Chalecki has ever made a claim, other than recently, for specific costs or losses and whether he had at any time a feasible plan to become self-sufficient from his farming operations. 
On 23 November 1984, Mr Chalecki injured his back lifting steel and corrugated iron when working as a builder for a hospital board. He was not able to undertake heavy lifting work again or even to sit or stand for long periods. He was effectively unable to work as a builder, though he did resume some building work in 1985. This did not last long, as he was certified unfit for work from 29 July 1986 (see Financial Documents file at 004). 
A claim for coverage under the accident compensation scheme had earlier been accepted by the Corporation and his ongoing treatment costs accordingly paid. Additionally, from July 1986 he received earnings-related compensation (“ERC”), based on his work as a builder and, as far as I am aware, continues to receive it. 
At the time of the injury, Mr Chalecki had a small hobby farm with pigs. 
According to Mr Chalecki, the Corporation did not have a rehabilitation officer on the West Coast of the South Island until 1987. The newly appointed officer visited him at his home on 17 December 1987. In her memorandum of 22 December to the district manager, she said she expected Mr Chalecki to make a decision as to whether he would put everything into self-employment (the farm) or work or perhaps do both. He said he wanted to become self-sufficient on the farm but all the money being made was being returned to it. 
The officer's memorandum stated that Mr Chalecki was interested in becoming self-sufficient with pigs, chickens and perhaps horticulture, such as lettuces and cabbages in raised beds. She reported to the manager that if he was still interested in the New Year, she would return and go through it thoroughly with him. She would see if he still wanted financing and how far he had progressed with his proposal. 
Mr Chalecki duly completed the “Fit for Selected Work” form left with him by the officer and returned it to the Corporation, bearing the date 17 December (though it is clear from his annotations that it was sent later). He advised what he had done to seek work and, in respect of “alternative work”, he was in the process of making the farm work more easily manageable. 
The rehabilitation officer visited Mr Chalecki again on 4 February 1988, recording this visit in a memorandum to the manager on 5 February. She said that he had no definite ideas about his future and was thinking of doing a correspondence course on pig raising and possibly horticulture. He intended to approach the Pork Board for a feasibility study and might even shift to Canterbury where farms were cheaper. He did not want to do this for the following two or three years because he felt his house (which was not situated on the small farm) would rise in value. The officer recorded that she would like to see him start an access course to get into the routine of working five days a week. She would put this to him and would follow it through over the following few months. 
The officer left another form with Mr Chalecki, who completed it on 23 February. He advised that he intended to visit (or had visited) the regional development council to obtain a grant for a feasibility study for full-scale pig farming. 
Mr Chalecki completed further forms for the Corporation on 21 March and 12 April. In the latter, he advised that he had attempted to purchase another farm, but somebody else had bought it. 
The rehabilitation officer had visited Mr Chalecki on 7 April 1988, as recorded in her memorandum to the manager on 14 April. She advised that he had looked at pig farming on the West Coast and in Canterbury but felt that he would have to borrow too much money for the venture to become self-sufficient. He would investigate making white moccasins for the Japanese market and selling them on the Nelson wharf to Japanese boats. Mr Chalecki had also thought of a work training programme in milking cows because he could still see a future for himself on the farm. If everything went well, she thought that the Corporation should offer him a contribution towards petrol as the dairy farm where he trained could be some distance away. She would obtain particulars on a milking venture and would put it to him. 
Further forms were completed by Mr Chalecki on 18 May and 9 June. In the first one, he advised that the Ministry of Agriculture and Fisheries was doing a feasibility study for him on setting up glasshouses for horticulture. In the later one, he said he had contacted the New Zealand Poultry Board concerning the sale of eggs. 
Possible self-employment grant 
In a further memorandum to the manager on 27 June 1988, the rehabilitation officer recorded a telephone conversation with Mr Chalecki on 15 June. She said she would like him to attend a polytech pre-course meeting, as all his self-employment ideas had not come to fruition. However, he had expressed concern about leaving his pigs unsupervised and a lack of transport. She had pointed out to him that he would be making himself unavailable for rehabilitation if he did not attend. In a conversation on 17 June, Mr Chalecki had said it would be a while before he bought hens because the levy was going to be reduced or abolished. 
In the memorandum of 27 June, the officer recorded offering a self-employment grant of up to $5,000, after submissions and a feasibility study. She told Mr Chalecki he would stay on full ERC for six months, which would include reinstating the 10 per cent being deducted “off his pigs ERC”. The following three months would then be at 60 per cent (of the ERC at 80 per cent), then three months at 40 per cent. The deduction would be made regardless of his income from the pigs for that 12-month period. The Corporation would remain responsible for his medical expenses. Mr Chalecki responded that he would not accept the proposal and that his lawyer had said the Corporation could not stop payments to him if he did not attend the polytech course. The memorandum recorded that he attended the pre-course meeting. 
There is another memorandum from the rehabilitation officer to the manager on 30 June 1988, following a meeting the previous day. A “final” decision was made that Mr Chalecki had to produce a feasibility study showing the hens to be a worthwhile venture, or he would have to attend the polytech course. This had been agreed. There is a handwritten annotation from the officer stating that if he attended the course, he would receive the “full 80 per cent of ERC for his pigs”. The annotations added that if he applied for the self-employment grant of $5,000, he would have full ERC for six months (based on his carpentry pay) and then 60 per cent for three months, followed by 40 per cent for three months. 
A visit from the rehabilitation officer to Mr Chalecki on 27 October 1989 is recorded in a memorandum to the manager on 16 November. Mr Chalecki had decided to look at free run hens to supply eggs while running down the pig farming. As for a self-employment grant, he was informed that it would be necessary for him to have a cash flow feasibility study before the Corporation could consider a grant. The officer recorded that she would contact him within a few weeks to see what decision he had made and if he required the grant, she would forward the necessary forms to him. 
A further visit on 20 November 1989 was recorded in a memorandum to the manager of 1 December. Mr Chalecki was still looking at chickens and “Hydro Glass Housing”. He was also thinking of approaching a local gold dredging operation and seeking work. 
There was another visit from the officer on 8 February 1990, recorded in a file note dated 16 February. Mr Chalecki had bought another 200 hens which were laying well and was looking at selling his pigs, in order to increase the hens. This was more profitable and easier to run than pigs. He thought this was a more viable proposition and he was wondering if he was eligible for a self-employment grant to help him put up a further shed for the hens. The officer recorded that she would look at this and get back to him but would require a “cash flow etc” from him. 
A record was made of a telephone call between the rehabilitation officer and Mr Chalecki on 12 July. He advised that he would be shifting in August to another farm on the West Coast and would be increasing the number of free range chickens from 400 to about 2,000. He again enquired about a self-employment grant to help him set up the egg farming and was advised that he would need a “[projected] cash flow, viability and feasibility study”
The officer visited Mr Chalecki on 17 July, as recorded in a file note of 25 July. He advised that he was due to shift to another house, regardless of whether or not he sold his present house. His proposal for self-employment centred around the new farm because he hoped to increase the chickens from 500 to 2,000. He envisaged a clear profit of about $17,000 annually, but would still need a $5,000 grant. The officer recorded having asked him for submissions in the past which had not been sent. Mr Chalecki said that he had posted them two weeks previously but they must have been lost in the mail. 
Mr Chalecki provided a report dated 18 December 1990 from “Pigtech”. It set out details of the budget, financial assumptions, income and expenses and gross margin for pig farming. It was a detailed report dealing with breeding and and fattening weaners. It showed gross margins of the order of $21,000 to $26,000, based on around 500 pigs. 
Another visit from the rehabilitation officer on 28 February 1991 was recorded in a file note of 8 March. Mr Chalecki presented a cash flow which the officer described as a costing in relation to chickens, rather than a proper cash flow. She explained to him what was required for a self-employment grant and had again given him all the forms. He was finding it very difficult to set up as the house had still not been sold and was only being rented out. An undated handwritten one page document headed “Proposed Egg Producing Operation”, showed a profit of approximately $19,000, based on 2,000 birds. 
The officer visited again on 11 April, as recorded in a file note on 17 April. Mr Chalecki had still not prepared the cash flow for his egg farming venture required for the self-employment grant, but he hoped to have it in a few weeks. He was going ahead with a lot of development on borrowed money, the officer noting that the amount borrowed was far larger than the grant could ever be. 
There was a telephone discussion with a client officer of the Corporation on 22 August 1991. Mr Chalecki stated that he was not happy with the rehabilitation officer as he had not been given all the relevant information needed for the grant. He wanted an officer from another district. He was in a financial bind at that time as he had borrowed money for more land and had not been able to sell his house. 
There is a four-page handwritten proposal from Mr Chalecki concerning a possible egg producing operation, which appears to have been provided in about September or October 1991. It duplicated the one page document handed over earlier and added three pages with detailed costing. On the basis of 1,600 birds, Mr Chalecki estimated just over $14,000 in profit before tax. 
There is a statutory declaration from Mr Chalecki (dated 2 October 1991). He declared being the half-owner of a residence which was on the market, as well as the half-owner of another property in which he resided. That second property had been purchased with a bridging loan and he had also borrowed $20,000 from a savings bank to develop a poultry unit, in order to become self-employed. Once the first property had been sold, the proceeds of sale would be used to pay off the bridging finance and the $20,000 loan. He declared that he had no involvement in any other businesses nor shares in any companies nor interest in any other property. 
The Corporation sent the information concerning the poultry farm to a firm of accountants in Greymouth, Devlin Wilding & Co. This firm had previously been the accountants for Mr Chalecki but were not retained by him at that time. A form (undated) completed by Mr Chalecki at about the same time set out his employment background, relevantly stating that he had 10 years' experience breeding pigs and then had a few hundred free-range chickens. 
Accountant's feasibility report 
The report from Mr Gunn at Devlin Wilding & Co provided to the Corporation is dated 6 March 1992. It recorded that the firm had been instructed to assess an application for financial assistance of $5,000 to enable Mr Chalecki to become self-sufficient. His proposal was to establish a free-range poultry farm, commencing with 1,600 laying hens and building it up to 2,000 hens. He also intended to breed pigs for the local market for additional income. There was already a substantial poultry shed on the property, in which he had 900 laying hens purchased from his own resources. He wished to apply the grant of $5,000 to establish a chick-rearing shed, which would cost $5,000 ($2,000 for timber and $3,000 for labour). 
The accountant considered that, given Mr Chalecki's experience and obvious determination to become self-reliant, the proposal was feasible. The poultry farm would be viable in its second year of operation. There would be a net profit of “about $25,145”. The projected revenue and itemised expenses for Year 1 (but not the subsequent years) are detailed in the documentation made available to me, showing a projected net profit before depreciation of $11,645. Mr Chalecki had advised the accountant that he was physically capable of maintaining the day-to-day operation. Mr Gunn recommended that the grant of $5,000 be made to Mr Chalecki for the establishment of the chick-rearing shed. Furthermore, his ERC should be continued for a minimum of six months to allow for the establishment of the poultry unit. In his view, the Corporation should also consider a vehicle grant. As to the latter, I observe that the matter of a vehicle grant is not an issue before me. 
There is a dispute about whether Mr Chalecki was given this report at that time. I accept his evidence that he was not provided with the report at the time it was produced and did not see it until early 1994 (see his affidavit sworn 11 August 2014, consistent with the Corporation's file note of 22 June 1992). The undated file summary suggesting otherwise (at p097 of the Bundle of 8 April 2014) is vague and is not contemporary with the events recorded. The reference to Mr Gunn's statement of expenses in the file note of 11 March 1992 (p073 of Bundle) does not persuade me that the formal report was the subject matter of a discussion with Mr Chalecki around that date. 
On 11 March 1992, a different rehabilitation officer recorded in a file note her “initial suggestion” in relation to the proposal for a self-employment grant. The proposal was that Mr Chalecki would continue to receive ERC at 100 per cent for six months, reducing by one third at the end of that period and also at the end of each six months for the following 12 months. Mr Chalecki would not accept this. He said that he had been in a lot of pain and felt that he may not be able to become self-sufficient within the two-year time frame. According to the officer, he wanted to stay on full ERC, with the Corporation to find him a job. He had said he was prepared to become as independent as possible but because of his chronic pain, he was wary of the termination of his entire ERC after two years. 
The officer's further proposal, as recorded in the file note, was that on acceptance of the self-employment grant of $5,000 (and a car grant of possibly $4,000), Mr Chalecki's ERC would immediately reduce by 20 per cent. At the end of six months, it would reduce by a further 20 per cent, then at the end of 12 months by a further 40 per cent. 
The rehabilitation officer made a file note on 23 March 1992 stating that Mr Chalecki had decided that he was unable to accept the proposal until his house was sold. He owed too much money to have his ERC cut in any way. 
There was another visit by a rehabilitation officer, as recorded in a file note on 16 May. The officer recorded that the self-employment farming venture involved pigs and chickens, but that Mr Chalecki had said that he received a more consistent income from chickens than pigs. He required a renovated chicken shed and a milking shed to produce milk to feed the pigs. Mr Chalecki was advised that the closer his request was to $5,000 the more quickly it could be processed. He was also assured that his ERC would not be reduced until he showed an earning capacity. 
On 22 June, Mr Chalecki telephoned a client officer at the Corporation enquiring as to the delay concerning his self-employment project. He was advised that the Corporation was waiting for a report from Devlin Wilding before consideration could be given to his rehabilitation. This file note confirms to me that Mr Chalecki, along with the officer he had spoken to, had not seen the accountant's report which had already been produced in March. 
The rehabilitation officer phoned Mr Chalecki on 3 July 1992, recording the conversation in a file note of the same date. She advised him that the Corporation would not accept his self-employment proposal, as it was too much money to pay out with no foreseeable reduction in ERC. She would like to look at further treatment options and would pay for his travel and treatment costs. Mr Chalecki explained that he had just increased his overdraft and had 400 chickens arriving the following day. He was not prepared to leave as he did not want to lose one chicken. He was told that after 1 July he may have no option but to consider further treatment (the relevance of this date being that the new accident compensation legislation of 1992 had come into effect then). He said he was suffering from pain caused by earlier rehabilitation and asked for further claim forms. 
The Corporation wrote to Mr Chalecki on 12 August 1992 advising that those in receipt of a vocational rehabilitation allowance, as he was, had to be on an approved individual rehabilitation programme. The aim of the programme was to increase independence from the Corporation within one year. He was now required to develop such a programme. A further letter was sent to him on 13 August requiring a programme, the overall goal of which was reduced dependency upon the Corporation. It would have to set out intermediate goals, if compensation was to continue. He could develop his own programme if not happy with that of the Corporation. 
The rehabilitation officer made a file note on 25 August. She had begun working on a vocational rehabilitation programme, but Mr Chalecki had continued to be negative towards all rehabilitation assistance. He had always turned down the Corporation's proposals regarding self-employment. His requests for financial assistance were in excess of what the Corporation was prepared to pay. He received a “fully unfit work certificate”, yet he milked eight cows twice a day and cared for 400 chickens, intending to have 800 chickens within six months. He additionally cared for pigs. Despite being self-employed on the farm, there was no reduction in his weekly compensation. The officer commented that Mr Chalecki was not prepared to increase his independence from the Corporation. 
Also on 25 August, in a memorandum to another officer, the rehabilitation officer recorded that as Mr Chalecki had failed to come up with a rehabilitation programme, all payments should cease until he had prepared a programme. 
On 26 August, the Corporation advised Mr Chalecki that it was entitled to stop rehabilitation assistance and compensation if a person refused to develop a rehabilitation programme. Accordingly, his vocational rehabilitation allowance was in jeopardy. He was invited to give reasons for his failure, otherwise consideration would be given to ceasing compensation. 
According to a file note, Mr Chalecki spoke to a client officer on 28 August. She advised him that he was responsible for his own rehabilitation and that the reasons for his failure to develop a programme had to be submitted by 9 September. 
Mr Chalecki then submitted a one page “Projected Income for Poultry/Pig Farm Operation” on 1 September. Based on 800 chickens and six sows, there was a projected net profit before depreciation of $4,000. He would also milk eight cows in order to feed the pigs. In the second and subsequent years, the net profit would be $10,800. In the same document, Mr Chalecki advised that he was presently repaying a loan to build the poultry sheds. He required reinvestment to replace and improve the pig housing to a more permanent low maintenance facility, which was less labour intensive for feeding and cleaning. 
The Corporation wrote to Mr Chalecki on 30 September advising that it had considered his projected income sheet and the accounts submitted by his accountant. The letter enclosed a copy of his individual rehabilitation programme and he was advised that if he was dissatisfied with it he could submit one of his own, with the aim being independence from the Corporation. The Corporation's plan showed the long-term goal being independence “with regards to his secondary employment compensation within 10 months”. The intermediate goals were a reduction of secondary weekly compensation by 30 per cent on 30 October 1992, and then progressively up to 100 per cent on 30 July 1993. 
Mr Chalecki replied on 6 October 1992, with his own plan. He advised that he did not expect to achieve 100% independence in his secondary employment within 10 months. He maintained his present farming operation with the help of his father and wife, although he hoped to be able to cope with more of the workload in the future, once the animal housing had been developed. He did not envisage complete independence in his secondary employment for a long time, if at all. He pointed out that he had been unemployed for approximately seven-and-a-half years and had cooperated with the Corporation's efforts to rehabilitate him. He had come to the conclusion that employing himself in the manner which he had undertaken was the only way of becoming semi-independent financially from the Corporation. 
In the plan, Mr Chalecki set out his long-term goal as becoming as independent as possible with regards to his secondary employment compensation. His intermediate goals were a reduction in the secondary weekly compensation by 25 per cent by 1 June 1993, with further reductions leading up to 65 per cent by March 1994. 
Corporation decision on self-employment grant 
On 14 April 1993, the Corporation wrote to Mr Chalecki advising that it was unable to accept his request for a self-employment grant. This confirmed verbal advice given on 3 July 1992. According to the relevant legislation, the Corporation had the responsibility of restoring an injured person to the fullest vocational and economic usefulness of which they were capable. The “guideline” set out the circumstances in which the Corporation could give such assistance. The purpose of the assistance was to promote opportunities for financial independence through self-employment. Furthermore, ERC would continue for a period to enable the injured person to become established in self-employment. 
The Corporation wrote to Mr Chalecki on 21 April advising that it accepted the individual rehabilitation programme that he had presented on 6 October. The intermediate deductions he had set out would be made. 
In reply, Mr Chalecki wrote on 26 April advising that he had not proceeded with the programme because of the absence of the Corporation's consent to his goals. His letter presented a new set of deductions, starting with 25 per cent by 1 December 1993 and leading to 65 per cent by September 1994. 
Review of Corporation's decision sought 
On 27 April 1993, Mr Chalecki sought a review of the Corporation's decision of 3 July 1992, notified to him by post on 14 April 1993, to decline a rehabilitation grant in order to help him establish a self-employed farming operation. He advised that several years previously he was told that he was basically a labouring person but due to the injury would no longer be able to cope with that type of work. The Corporation had never properly assessed his vocational or economic usefulness. He personally went over all the options available to find one suitable, even unsuccessfully applying for jobs. He came to the conclusion that self-employment as a farmer was his only option, as he had been farming part-time prior to the accident. 
However, due to his injury, Mr Chalecki said he realised that the farm had to be less labour intensive and therefore required increased capital to establish it. He had sold the smaller piece of land and the family home, to buy a larger property. He had done this to increase the stock of laying hens from 50 to 1,000 and setting them up in laying cages. He also wished to have a few cows to feed the pigs. 
According to the review application, Mr Chalecki said he had used his own money and personal loans. When he approached the Corporation for a possible grant to set up the milking operation, he was asked about a quote for a small milking shed and plant. He had not actually asked to be provided with the full cost but had requested any funding, however this had been declined. Mr Chalecki said he had not been informed of the exact amount available for the grant. In order to give himself at least partial employment, he had gone from being debt free to now having a $20,000 loan from a bank and owing his parents $10,000. He also had a lot of ongoing costs associated with the farming venture which would not have been incurred if he had been 100 per cent physically able. 
A file note from a rehabilitation officer dated 3 May 1993 stated that Mr Chalecki had been advised on 15 May 1992 that a grant in the region of $5,000 would be considered on receipt of “quotes and evidence of increased independence”. According to the note, his response at the time was to produce three estimates of costs between $11,000 and $16,000 (for a milking shed), but this was deemed to be unrealistic and he was advised of this on 3 July 1992. No evidence had been submitted regarding viability, nor was there any written application for self-employment assistance. The officer remarked that there had been changing statements from Mr Chalecki about the work he could do on the farm. 
In response to the review application, an internal administrative review was carried out by a branch manager. She advised Mr Chalecki on 5 May 1993 that no evidence had been submitted to the Corporation regarding the viability of his venture, which he had estimated would cost between $11,000 and $16,000. She confirmed that the self-employment grant would not be allowed, as advised on 3 July 1992. He was advised that he was entitled to have the review proceed to a hearing, if he wished. 
Agreement regarding rehabilitation grant and reduction in ERC 
A district manager visited Mr Chalecki on 11 May. The manager recorded in his memo of 12 May that there was to be a new agreement, with the Corporation accepting the revised changes to compensation payments set out in Mr Chalecki's letter of 26 April. 
Officers of the Corporation met with Mr Mr Chalecki on 3 June 1993, as recorded in a letter to him of the same date. The letter stated that Mr Chalecki's concern was focused more on the percentage reductions in his weekly compensation, rather than the self-employment grant. He wanted the Corporation to review his balance sheets in order to make deductions based only on his earnings. He is recorded as having accepted the decision that he would not get the grant if the Corporation made deductions based on his actual earnings, rather than enforcing percentage reductions in advance (irrespective of his earnings). 
Mr Chalecki countersigned the letter of 3 June, with his wife annotating a copy of the letter advising that he would no longer maintain pigs or milking cows, since his father who had assisted him had died suddenly. Her husband would concentrate on battery egg production. The first 400 hens would be producing by the end of June, with the next 400 due to arrive at the same time. He hoped to increase to approximately 1,000 birds in production in 1994. He had sufficient sheds to do this, but needed to purchase more cages and attachments. 
An internal Corporation memorandum of 29 October 1993 recorded that Mr Chalecki had made losses on his farming venture every year from 1985 to 1992, with $3,927 lost in the last year ending 31 March 1992. In accordance with the agreement, he received full weekly compensation and would continue to do so while the business ran at a loss. Mr Chalecki was not pursing the decline of the self-employment grant in light of the agreement of 3 June. 
The Corporation wrote to Mr Chalecki on 21 January 1994, advising that the then current accident compensation legislation (the Accident Rehabilitation and Compensation Insurance Act 1992) did not provide for rehabilitation grants. He was invited to discuss his rehabilitation concerns with the acting branch manager. He did so and was informed by the manager on 27 January that he could proceed with a review of the decision to decline the rehabilitation grant. 
There continued to be discussions and correspondence between Mr Chalecki and the Corporation regarding rehabilitation and ERC. In particular, Mr Chalecki made a formal complaint about documentation he considered was missing from the Corporation's file. 
In a letter to the Corporation on 8 March 1994 (not 1995 as recorded on the letter), Mr Chalecki advised that he had discontinued the poultry side of the business, but maintained pigs. Accordingly, he pointed out, not all components of self-employment had failed. It is apparent from this letter that he had seen Mr Gunn's report by then. 
In a long letter on 31 May 1995, Mr Chalecki set out his attempts at rehabilitation. He had not made a profit to date because of the large initial capital outlay. When his father died, he had ceased the poultry operation as his father had lifted the bags of food and collected the eggs. 

From Accident Compensation Cases

Table of Contents