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Accident Compensation Cases

Hawkins v Accident Compensation Corporation (DC, 23/05/18)

Judgment Text

DECISION OF JUDGE G M HARRISON 
Judge G M Harrison
[1]
Mrs Hawkins applies for leave to appeal to the High Court against a decision of Judge Henare of 3 August 2017 in which the decision of the Corporation, which had been upheld on review, declining to pay weekly compensation, was upheld. 
[2]
The application was considered by Judge Walker on 4 September 2017 when directions as to the dates by which the submissions of the parties were to be filed, were given. Those submissions have now been filed. It was further directed that the application be determined on the papers. 
The issue 
[3]
Mrs Hawkins suffered an injury to her left neck and shoulder in July 2006 and continued to work on reduced hours until she stopped work on 23 July 2007. Mrs Hawkins and her husband were working directors and shareholder employees of Southern Homes Limited, which provided house construction and building services. Each director held 400 shares and a further 400 shares were jointly owned. The company was put into liquidation in August 2008. 
[4]
In March 2007, that is after the injury in 2006 but before Mrs Hawkins ceased work in July 2007, Mrs Hawkins changed the basis upon which she was remunerated by the company. Up until March 2007 she had received an annual tax year shareholder salary not subject to PAYE deductions. This changed to her receipt of a shareholder salary subject to PAYE. 
[5]
The Corporation determined that the company was not in a financial position to pay a salary to the shareholders and that there did not appear to be any valid business reason for the change in payment of remuneration. 
[6]
The assessment was made essentially pursuant to cl 31 of Schedule 1 to the Act which requires the Corporation to determine appropriate earnings by taking into account an income tax return filed by the claimant if the Corporation considers that the return and any related accounts have not been unreasonably influenced by the effects of the incapacity on the claimant's income or business activities. 
[7]
The entire decision was taken up with determining that issue. In conclusion, the Judge said: 
“[51]
Taking all of these matters into account, I am not satisfied on the evidence before me that there were valid business reasons to support the change in remuneration methodology. 
[52]
In consequence, I cannot make the finding that the 2007 tax return for Mrs Hawkins represents reasonable remuneration, has not been unreasonably influenced under cl 31 and should be accepted by the Corporation. ”
[8]
Mr Miller, counsel for Mrs Hawkins, accepted that Her Honour made a finding of fact that there was not a sufficiently valid reason for a change in the accounting to a PAYE shareholder salary, which in turn meant that the Corporation's decision under cl 31 that the relevant tax return had been unduly influenced by the incapacity, was correct. 
[9]
The issue therefore is whether, having determined that no remuneration was payable pursuant to cl 31, the Corporation, and the Judge failed then to consider pursuant to s 15(3) of the Act whether a reasonable generic salary could be assessed, without this being subject to or related to the financial position of the company. 
Assessment 
[10]
Section 15 should be considered in the event that no remuneration was found to be payable pursuant to cl 31. 
[11]
At paragraph 39 of his submissions Mr Hunt said: 
“It is accepted that an omission to deal with a matter that has explicitly even if belatedly been raised may be regarded as an error of law (although in this case, if it were, the consequence would have to be — as in Gardner — a referral back to the respondent). ”
[12]
He went on to submit that taking into account the overall history of the matter and the material before the Corporation, this was not a case in which leave to appeal should be granted. 
[13]
The appellant relies upon the decision of Judge Walker in Gardner v ACC [2016] NZACC 320
[14]
That was a decision with similarities to the present application whereby it was held that where earnings could not be calculated under s 15(2) of the Act, which relates to earnings as a shareholder employee, the Corporation was then obliged to consider pursuant to s 15(3) amounts that represented reasonable remuneration for the services that the person provided to the company as an employee and as a director in the relevant tax year. 
[15]
At [185] of her decision Judge Walker said: 
“Accordingly, given that pursuant to s 15(1)(b) the Corporation has decided the amount calculated in s 15(2) is not reasonable (i.e. the amount set out in the accounts) then the Corporation is required to establish the amount of earnings pursuant to the terms of s 15(3). ”
[16]
She went on to consider the decision of Judge MacLean in Irwin v ACC [2016] NZACC 58Has Cases Citing which are not known to be negative[Green] , and concluded that there was such an obligation which the Corporation had not undertaken and the appeal was allowed with the matter being referred back to the Corporation for reconsideration. 
[17]
Mr Hunt's second submission in opposition to leave being granted was that Mrs Hawkins had not responded to requests from ACC for additional information concerning her work duties and that that should count against leave being granted. 
[18]
Mr Miller, in his submissions in reply, assessed the information that was before the Corporation and that it was possible for an assessment to be made pursuant to s 15(3). 
[19]
I do not see that matter as being relevant to whether or not leave to appeal is granted. Clearly, the assessment pursuant to s 15(3) was not undertaken. If there is no legal obligation to do so then that is an end of the matter. If there is such an obligation then the likely course will be for the matter to be referred back to the Corporation for that exercise to be undertaken. 
Conclusion 
[20]
I have reached the view that leave to appeal should be granted on the following question: 
“If the Corporation, and the Court on appeal, determines that no remuneration is payable pursuant to cl 31 of Schedule 1, must the Corporation and the Court on appeal then undertake an assessment pursuant to s 15(3) of the Act? ”
[21]
There is no order as to costs. 

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