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Accident Compensation Cases

Neal v Accident Compensation Corporation (DC, 18/06/07)

Judgment Text

Judge D A Ongley
In August 1978 the appellant was diagnosed with leptospirosis which he had contracted through his occupation as a pig farmer. ACC accepted a claim for cover and paid weekly compensation from 22 August 1978 to 20 May 1979. 
In 1985 Mr Neal sought further weekly compensation when his leptospirosis was recurring. ACC first accepted the claim but after receiving further medical information declined entitlements on 2 April 1986. The claim was considered again when Mr Neal lodged a medical misadventure claim in September 1992 for the same symptoms and incapacity. Evidence gathered then suggested the symptoms were the result of leptospirosis, but ACC declined to accept that there was a causal link between the appellant's depression and his leptospirosis. Cover for depression was eventually obtained following an Appeal Authority decision of June 1999: Neal (27/99). The Authority directed ACC to consider further entitlements. Sadly, Mr Neal died in November 1999 before his claim could be finally resolved. 
The appeal raises questions about the date on which the Corporation received necessary information to make a payment of arrears of weekly compensation when it was required to deduct from the payment the amount to be refunded to WINZ for benefits paid to the claimant during the period for which backdated weekly compensation was to be paid. 
The evidence 
Some evidence of information that the Corporation had received was recorded in an internal ACC memo of 10 February 2000 which stated that the earnings information required to calculate payment was already on file because of the original weekly compensation payments made in 1978. There were no post-incapacity earnings, that being confirmed on tax returns held by IRD for 1981 to 1984 and received by the Corporation in 1986. The writer of the memo considered that the information already on file was also enough to establish incapacity. The claimant had received a WINZ benefit and the Corporation needed establish how much had to be repaid to WINZ by way of excess benefit paid after taking into account the entitlement to weekly compensation. 
In March 2000 ACC issued a decision on the total amount of weekly compensation owed from 1978 to 1999 and then sought information about the amounts refundable to WINZ. WINZ replied on 28 March 2000 that Mr Neal was on sickness benefit from March 1986, the exact date being unknown. On 19 April 2000, ACC paid the appellant $31,527.36 net of tax for arrears of weekly compensation for the period 21 May 1979 to 16 March 1986 during which no WINZ benefits had been paid. The gross amount was $48,660. 
During 2001 the appellant took the decision to review and appeal. The Corporation's decision was upheld in Neal (185/01). The Corporation then requested information from WINZ and was advised on 26 September 2001 that $110,906.66 net was the amount that needed to be reimbursed. That absorbed most of the balance payable to the appellant and the Corporation paid to him $5,727.24 on 21 December 2001 and $6,073.08 on 28 January 2002, as the final payments due to him. Later it was found that there was a miscalculation and the Corporation paid a further $15,262.35 and interest. 
A review of the interest calculations ran into jurisdictional trouble in 2004 and the Corporation agreed to issue a new decision to assist with appeal questions. This resulted in a decision on 27 April 2005, in which the Corporation declined to pay interest on the backdated weekly compensation payment covering the 1979 to 1986 period on the basis that the Corporation did not have all necessary information until 28 March 2000 and had made payment within 1 month. The appellant failed on this issue on review. The Reviewer declined to award any interest for the weekly compensation payment covering the 1979 to 1986 years because she found that the Corporation required WINZ information prior to calculating and making the payment. 
Section 101 of the 1998 Act governed the payment of interest in this case: 
“101. Payment of interest when insurer makes late payment of weekly compensation— 
The insurer is liable to pay interest on any payment of weekly compensation to which the insured is entitled, if the insurer has not made the payment within 1 month after the insurer has received all information necessary to enable the insurer to calculate and make the payment. 
Section 373 of the 1998 Act required the Corporation to refund to WINZ the amount of any income tested benefit to the Department out of any compensation entitlement established for the same period as the benefit that had been paid to the claimant. In Wardle v ACC (High Court, Wellington, AP 134/02), Gendall J decided that where payment of backdated weekly compensation is made under the 1998 Act, the mandatory requirement of s 373 has the effect that the WINZ reimbursement information is also part of the information necessary to calculate and make payment. That is common ground in this appeal. 
Although the appeal involves four payments for three different periods of time, the present judgment is an interim judgment limited by consent of the parties to the question of liability for interest arising by virtue of ACC having all necessary information affecting a period of time in which there were no WINZ payments made to the claimant. 
The appellant accepts that liability for interest cannot occur from a date earlier than the commencement of the Accident Rehabilitation and Compensation Insurance Act 1992. It is therefore submitted that interest is payable on the amount of $48,660 from 1 July 1992 until payment. The submission is that ACC had all the information necessary by 1986. 
Ms Ross relied on Barnett v ACC (High Court, Auckland, 5 December 2002) in which Patterson J decided that where cover is declined but is subsequently granted on review or appeal, the claimant would be entitled, from an earlier date when the Corporation had all the necessary information, to interest, irrespective of the fact that cover was not granted until some time later. Barnett has been follwed in the District Court, for example in Burston (181/03) and (Kena) 49/04. 
It is submitted for the appellant that the evidence contained on the ACC file by the mid 1980s was sufficient to establish incapacity from 1979 to 1986. Ms Ross said that a perusal of the full files suggests that there are a significant number of missing documents. But, in dealing with the point concerning WINZ information, counsel have asked the Court to leave aside questions of adequacy of other information and to assume for the sake of this argument that the Corporation may have had all necessary information aside from details of income tested WINZ benefit received by the appellant when not receiving his weekly compensation entitlement. 
There is no evidence that ACC was aware earlier that there was no WINZ liability. No WINZ benefits were paid between May 1979 and March 1986. It is submitted for the appellant that the wording of s 373(1) makes it clear that the section is only triggered if a person has been in receipt of an income tested benefit for the same period that they have entitlement to weekly compensation. The appellant's argument is that where there are no WINZ payments, the preconditions for s 373 liability do not occur. The submission is based on the wording of s 373. 
“373. Relationship with social security benefits: reimbursement by insurers— 
This section applies where a person - 
Receives a payment of an income-tested benefit under the Social Security Act 1964 in respect of a period; and 
Establishes a claim to an entitlement from an insurer (including the manager) in respect of all or part of the same period. 
An excess benefit payment is treated as having been paid in respect of that entitlement. 
An excess benefit payment is the part of the benefit payment (up to the amount of the entitlement) that is in excess of the amount of benefit properly payable, having regard to the entitlement under this Act. 
The insurer must refund the excess benefit payment to the department responsible for the administration of the Social Security Act 1964 - 
If the insurer knows that this section applies; or 
If requested to do so by the department. 
For the purposes of this section, an excess benefit payment includes a payment of any part of a married rate of benefit that is paid to the spouse of the person who established the claim to the benefit. ”
Section 373(1)(a) governs the application of the section and applies only in cases in which a person “receives a payment of an income-tested benefit under the Social Security Act 1964 in respect of a period for which he or she also establishes an entitlement”. The consequence of a literal reading of s 373(1)(a) is that the section does not apply to the appellant. Ms Ross submitted that the position in that case was similar to that obtaining under the 1992 Act when refund of benefits paid to the claimant was discretionary. Under the 1998 Act, it is submitted, there is no liability for the Corporation to refund excess benefit to WINZ until a period giving rise to liability is identified. 
The Corporation's argument is that the information is necessary in the first place to ascertain whether nor not s 373 has to be taken into account. In other words it is a potential liability until the Corporation can ascertain whether the section applies. Mr Barnett submitted that the WINZ information is integral to the calculation of the entitlement as are post-accident earnings, so just as it is necessary to establish what, if any, post-accident earnings a claimant has, it is equally necessary to establish what, if any WINZ payments were received. If it transpires on investigation, that there are no post-accident earnings then that is necessary information just as it is necessary information to establish that there have been no excess benefit payments. 
A similar question was considered in ACC v Knight (High Court, Christchurch CIV-2005/485/1582, 9 November 2005). The Corporation, after due inquiry, had accepted there was no post-accident income for one period during which the claimant should have received weekly compensation. Randerson J considered a submission that it must follow that the Corporation had all the information necessary to calculate the weekly compensation. He said: 
In support of this contention, Mr Shaw referred me to a decision of John Hansen J in Howley v ACC (HC Invercargill, AP 29/01, 6 December 2001) at [10] and [20]. However, I accept Mr Hunt's submission that Howley is clearly distinguishable from the facts of the present case. In Howley, John Hansen J found that the Corporation had all necessary information at a date in 1985 but had miscalculated the correct compensation due. When the matter was recalculated correctly in 1998 the Corporation was simply reconsidering existing material. It followed that interest ran from 1985. 
I respectfully adopt the view expressed by Gendall J in Wardle v Accident Rehabilitation & Compensation Insurance Corporation (HC Wellington, AP 134/02, 18 October 2002) at [15] when he rejected the appellant's contention that interest ran under s 72 of the 1992 Act from the date when payment of compensation was due. Gendall J drew a distinction, which I accept, between the date from which a compensation entitlement arises and the eventual payment of the entitlement. The legislation deliberately provides for interest to run from a date one month after all information necessary to enable the Corporation to calculate and make the payment is received. 
The legislation does not provide for interest to be paid from the date of commencement of the entitlement. Nor does it allow for a retrospective deeming of receipt of ‘all information necessary’ when it is later established on inquiry that, for example, there was no relevant post-accident income which would require abatement of the compensation due. Accordingly, Mr Shaw's second submission must fail. ”
Randerson J found a fallacy in the reasoning that the Corporation had all necessary information before it acknowledged liability to pay backdated compensation, because that was effectively a contention that the Act contemplates a deemed receipt of all necessary information at the beginning of the relevant period if it is established later there was no post-accident income during the relevant period. The approach taken by Randerson J was that the relevant information was the information obtained upon inquiry by the Corporation when addressing calculation and payment. He rejected an approach that would look at the information that had been available at the beginning of the relevant period. He distinguished Howley because in that case the Corporation was simply reconsidering existing material when recalculating payments correctly in 1998 when it was discovered that the wrong base salary had been used. 
Cases where there have been no payments will almost inevitably involve late receipt of information by the Corporation. Howley was different because the Corporation always made the payments, but had calculated them wrongly despite having the pre-incapacity earnings information needed to calculate them correctly. In Knight, Randerson J viewed receiving the necessary information as an event connected with the Corporation's inquiry into the information for calculation and payment of arrears of compensation. The relevant time was the point at which the information was received in response to inquiry, no doubt including the time at which information was volunteered by the claimant. By the time of such an inquiry, part of the necessary information was the information whether or not excess benefit had been paid. 
The appellant's argument in the present case is that there was no WINZ information for the Corporation to receive because there had been no payments over the relevant period. The Corporation's response is that it still needed the information that there had been no WINZ payments, just as in Knight the Corporation needed the information that there had been no post-incapacity earnings. While such information might not have been necessary if the inquiry had been made at a very early stage, by the time the claim for interest was addressed, the information was necessary in order to make the payment to the claimant. 
I agree that WINZ information is integral to the calculation. When the payment is to be calculated and made to the claimant, the WINZ information is as essential as the details of post-incapacity income, which was the information considered by Randerson J in Knight. The “triggering” argument overlooks that there is a contingent or possible liability that the Corporation needs to check before being able to pay the claimant. It is not the same as the position under the 1992 Act where there was no obligation but only a discretionary decision whether to refund WINZ, otherwise leaving the responsibility upon the claimant to do so. Randerson J described the appellant's argument as a “retrospective deeming”, which is essentially the same as the “triggering” argument advanced in this appeal. 
Ms Ross submitted that it would be unfair to use s 373 to refuse interest on say a 30 year payment when a benefit might have been received for one week. She noted that backdated payments tend to be made in tranches once they are cleared, and that was done to some extent in this case. I think the answer is that fairness in that sense is not an aspect of s 101, which is only concerned with interest on payments delayed after all necessary information is received. The Corporation does not have a liability for payment to compensate a claimant for loss of use of unpaid compensation. That only occurs in cases where the Corporation always had all necessary information, as in the case of Howley. If ascertaining whether there is a debt to WINZ is necessary information, then s 101 applies, leaving no room to consider whether the claimant should have compensation by way of interest for being out of pocket over a long period of years. 
Section 373(4) argument 
A further submission was that s 373(4) applies: 
If the insurer knows that this section applies; or 
If requested to do so by the department. 
The section applies when the claimant has received a payment of an income-tested benefit under the Social Security Act 1964 in respect of a period for which he establishes a claim to a compensation entitlement. So the argument is that until the refund liability is known, ACC does not know that the section applies. Until it seeks information from WINZ it does not know whether the section applies, and it has no refund request from the department. Therefore the application of s 373 has not been “triggered”
There is no evidence that the Corporation knew that the appellant had received benefit payments. It knew of course that the section applied if the claimant had received such payments, but subs (4) could not be taken to refer to the Corporation's knowledge of the law. It must be taken as addressing the Corporation's knowledge of fact, namely whether the appellant received a benefit for a period for which he later established an entitlement. 
This submission was apparently not made in Wardle where the judgment turned on the mandatory requirement under s 373. The argument is that s 373 does not bind the Corporation unless certain facts are established, and in the absence of evidence of those facts there is a situation in which the Corporation is not required to obtain information in order to make a calculation of the balance after settling a refund due to WINZ. The evidence is that the Corporation made the WINZ inquiry on 13 March 2000 and received information in a letter of 28 March 2000. There is no evidence of the Corporation earlier having had any knowledge that the appellant was in fact a person to whom s 373 applied, or having had any request from the Department. 
This Court is effectively being asked to decide that Wardle was decided per incuriam. It would not be appropriate to reach that conclusion without full argument on the point because Wardle has been followed consistently. The submission must also be addressed with caution because it was advanced almost as an afterthought and it has not been considered by the respondent in marshalling its evidence. 
Mr Barnett pointed out that the Corporation's letter to WINZ stated 
“I understand he received a sickness benefit from approximately 1989. 
Our entitlement goes back to 1978, therefore please advise if any required refund since then. ”
The wording suggested that the Corporation had the general idea that a sickness benefit had been paid from approximately 1989. That provides some evidence that the Corporation did know that s 373 would apply. Mr Barnett's submissions at the time of the review stated that it was known that the claimant had received WINZ payments, but that neither ACC nor the claimant know the relevant dates at which the payments started and ended. The Reviewer found that the Corporation was aware of a family meeting in October 1999 at which it was advised that the claimant had been receiving a WINZ benefit. The argument in the present appeal concerned the Corporation's obligations around the time of its enquiries in March 2000, when it would evidently have been aware that s 373 applied. 
For the foregoing reasons, I reject the argument that interest would be payable from the dates when compensation was due when dealing with those periods for which no benefit was paid. The question whether s 373 did not apply because the Corporation did not know that the section applied and had not received a request from the Department is reserved for further evidence and argument if that should become necessary. The question whether the Corporation had all necessary medical information has not been argued and that is also reserved for further argument. 
Costs are reserved to await the determination of all questions in the appeal. 

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