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Accident Compensation Cases

Reddell v Accident Compensation Corporation (DC, 11/11/08)

Judgment Text

Judge J. Cadenhead
This is an application for leave to appeal to the High Court on a point of law against a decision of His Honour Judge M.J. Beattie delivered on 30 May 2008. 
The issue in the appeal is succinctly stated by His Honour in paragraphs [1]-[3] of his decision: 
“The issue in this appeal concerns the correctness of the calculation of the sum of backdated weekly compensation paid to the appellant for the period 22 February 2001 to 12 May 2003. The decision in question was issued by the respondent on 30 January 2004. 
The matter in dispute raised by the appellant does not concern the calculation of his gross entitlement, but rather the amount of the net payment made to him after deduction of a sum reimbursed to WINZ, including refund of tax paid, and the amount of PAYE tax paid by the respondent to IRD on the net amount of that lump sum of backdated weekly compensation. 
Details of the respondent's decision now in dispute, as contained in its decision letter of 30 January 2004, is as follows: 
Total gross entitlement: 
Less WINZ earnings reimbursement: 
Less PAYE: = 30.2% × $56176 
Less Student Loan = 9% × $56176 
- $5,055.75 
Less WINZ accommodation reimbursement 
Nett payment deposited to your account 
$32,868.31 ”
The background facts relevant to the issue in this appeal may be stated as follows: 
The appellant has cover for a back injury suffered in a motor accident on 11 April 1998. His injuries included a compression fracture of T12. 
After a period of rehabilitation the appellant was assessed as having a capacity for work and his weekly compensation ceased on 3 December 1999. 
In February 2001, the appellant presented an ARC18 Medical Certificate dated 22 February 2001 which indicated that the appellant was unable to work due to back dysfunction. 
After some delay the respondent agreed to reassess the appellant's capacity for work. 
A decision was made on 2 August 2002 by the respondent that the appellant continued to have a capacity for work. 
The appellant sought a review of this decision but a review hearing was not convened within the statutory time limit. 
Ultimately, by review decision dated 12 August 2003, the appellant was found to be entitled to a deemed decision that he no longer had a capacity for work and that thereby his entitlement to weekly compensation should be reinstated as from the date of the medical certificate. 
The respondent accepted that decision and proceeded to calculate the appellant's entitlement, it having been advised that for a considerable period during which the appellant had not been receiving weekly compensation, he had been on a WINZ benefit. 
WINZ advised the respondent of the amount to which it required to be reimbursed and upon receipt of that advice the respondent made the calculation which resulted in its decision of 30 January 2004, now the subject of this appeal. 
The respondent's decision was confirmed by review decision dated 24 March 2004. 
Essentially, the appellant makes two points which he considers establishes that the respondent has made greater deductions from the gross weekly compensation amount than it ought. Firstly, he contends that the way in which the reimbursement to WINZ was paid effectively amounts to him having paid PAYE tax twice on sums received, and secondly, the lump sum paid to him by way of backdated weekly compensation attracted a far higher tax rate than would have been the case had the respondent accepted the ARC18 Certificate in the first place, and his weekly compensation had been taxed at the normal rate of 19.5% rather than the 30.2% fixed upon by IRD. 
Mr Tui, for the respondent, submitted that s 252 of the Act requires the respondent to refund WINZ benefits paid to a claimant for the periods during which the claimant was entitled to receive weekly compensation and, further, where a claimant receives weekly compensation, PAYE must be deducted in accordance with the Income Tax Act. 
Counsel further submitted that there is no provision in the Act whereby the respondent can reimburse the appellant for the difference in tax that he was required to pay by reason of receiving the backdated weekly compensation as a lump sum as opposed to him having received it progressively over more than one tax year. 
The Appellant's Submissions 
The appellant submits that the decision of Judge Beattie was incorrect, when he decided in favour of the respondent on these issues. Judge Beattie decided that: 
“There can be no dispute that by virtue of the provisions of s 252 of the Act that the respondent is required to refund the excess benefit payment to WINZ where it is established that the appellant has a claim to an entitlement for weekly compensation from the Corporation in respect of the same period within which that benefit was paid. 
In the case of this appellant, the whole of the benefit paid to him during the period for which he was ultimately entitled to be receiving weekly compensation, was regarded as excess benefit under the Act, and so the whole amount which had been paid to him by WINZ in the period 22 February 2001 to 12 May 2003 was required to be repaid to WINZ out of the weekly compensation that was calculated as being due to the appellant for that same period. 
The amount required to be repaid is the gross amount, that is the total amount of the benefit before tax. It is, however, the case that WINZ has paid the tax to the IRD and in the case of the appellant the amount of tax paid was $4,318.67. 
In the present case the appellant was aware that although the amount of the refund to WINZ which was deducted from his gross entitlement was the gross benefit, it was a fact that WINZ only received payment from the respondent of the net amount of the benefit, namely, $23, 392.94. It was on this basis that the appellant contended that he was paying the tax twice. 
The same issue had been raised before the Reviewer and a representative of the respondent gave evidence to the Reviewer about how the reimbursement to WINZ and the arrangement with IRD worked. As recorded in his decision, the Reviewer stated the evidence as follows: 
‘Ms Hinckesman said that ACC had to deduct the total gross benefit Mr Reddell received from WINZ, from the total weekly compensation owing to him. This was $27,711.61. 
When a claim for reimbursement is submitted by WINZ, IRD automatically refunds the tax to WINZ. ACC reimbursed WINZ the net amount of $23,392.94, and IRD would have refunded WINZ the tax, of $4,318.67. There was no double taxation of this amount. ’
ACC said that it appeared that Mr Reddell was unaware that IRD had reimbursed WINZ the tax amount. That would explain why he thought he had been taxed twice. ACC stated this is done so that, for tax purposes, it shows that weekly compensation was paid, instead of the benefit. …  
In similar vein, Mr Tui explained the position as follows: 
‘The total gross benefit was deducted from the total gross weekly compensation payable, no actual reimbursement occurs here. The nett amount of the benefit was reimbursed to WINZ and the taxable portion was paid to the Inland Revenue Department. This is because when a claim for reimbursement is submitted by WINZ, IRD automatically refund the tax amount to WINZ. This is done so that for tax purposes it appears that weekly compensation was paid instead of a benefit. This proves that there is no “discrepancy” in the taxation. However, if Mr Reddell was unaware that the IRD had reimbursed WINZ the tax amounts, it may explain why he perceives that he has been taxed twice. ’
That being the explanation, in respect of which I am satisfied, it is clearly the case that the appellant has only paid tax on his weekly compensation/benefit once, and I find there is no error in the manner of the respondent's calculation of reimbursement to WINZ or the payment of tax to IRD in respect of his weekly compensation …  
The Court has considerable sympathy with the appellant, but the fact is that there is no provision in the Act for any reimbursement to him from ACC coffers of that greater tax paid. 
The Accident Compensation regime is wholly a creature of statute and it is a basic tenet of the legislation that entitlements under the Act can only be made in accordance with the provisions of the Act which allow for such entitlements. 
In that regard, there is a provision for the payment of interest on late paid weekly compensation, where payment is delayed for more than one month after all information necessary to calculate the entitlement has been received. That statutory provision does not pertain in this case, but it is an example of where there is a statutory provision which allows for reimbursement of a claimant for being kept out of his money in a particular situation. 
The Accident Compensation Corporation is required to comply with statutory provisions relating to entitlements, but equally it is not permitted, as a matter of law, to go outside the statutory regime and make payment of any amount that is not authorised by statute. The claim for the excess tax paid in the present case, is a claim not authorised for reimbursement by the Act, and therefore, as a matter of law, it cannot be paid or claimed within the context of the Injury Prevention, Rehabilitation and Compensation Insurance Act 2001. 
Whether there is opportunity for the appellant to make some claim outside the statute is a matter of conjecture, but for the purposes of this appeal, the claim must be rejected. 
For the foregoing reasons, therefore, I find that the respondent has correctly calculated the net sum payable to the appellant for his backdated weekly compensation and that it has only deducted from the gross amount thereof the amounts which are properly deductible and there has been no double payment of any sum. 
This appeal is therefore dismissed. ”
The appellant submits that this decision is incorrect and that the appellant has the right to have his proper tax fixed by the respondent and that any funds deducted first have to meet the criteria that such funds have been correctly calculated. 
The answer to this question is that section 252 of the Act provides that in the case of an excess payment the Corporation must refund that payment to the department responsible for the administration of the Social Security Act 1964. The Act by virtue of section 252(3) defines the excess payment as part of the benefit payment that is in excess of the amount properly payable, having regard to the entitlement under the Act. 
Section 253 deals with cases where the payment made is incorrect by subsequent determination and on request the department receiving such payment must refund to the amount paid to the Corporation. This section seems to imply that the person fixing the amount should be the other party and not the Corporation. It seems to me that the person fixing the amount should be in this case the Inland Revenue Department. The person paying the amount is clearly the Corporation. 
I agree with Judge Beattie that the Corporation has merely a responsive role in this case and that should be the end of this appeal, however, it is an important question who fixes that amount and on that issue I grant leave to appeal to the High Court. The reason for this decision is that the legislation is silent on that particular point, and that conclusion is arrived at by implication. 
For these reasons I give leave to appeal. There will be no order as to costs. 

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