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Accident Compensation Cases

Accident Rehabilitation & Compensation Insurance Corporation v McHardy (HC, 24/04/96)

Headnote - Brookers Accident Compensation Reports

Judgment Text

This is an appeal pursuant to s 111 of the Accident Compensation Act 1982 against a decision of the Appeal Authority dated 2 February 1995. The transitional provisions of s 152 of the Accident Rehabilitation and Compensation Insurance Act 1992 are operative. It is common ground that the matter is to be treated under the provisions of the 1992 Act. It is accepted that legislative amendment which would preclude this position now arising has no bearing on the decision. 
The respondent was for many years a legal practitioner in West Auckland. He was also heavily involved in charitable and community work. From the mid-1980's he became interested and involved in a venture called Westpark Marina Ltd. This was his downfall. A commitment to a substantial commercial transaction which collapsed eventually led to the respondent's personal bankruptcy. He also developed a serious depressive illness. 
Apparently as a result of substantial media attention to a decision of the Accident Compensation Appeal Authority in L v ACC Decision 313/92, 14 August 1992, Mr McHardy made an application for accident compensation cover. The claim was initially treated by the Corporation under s 28 of the Act which provides cover for occupational disease. It was declined. There was an administrative reconsideration of the matter after a request for it to be considered as a claim arising by reason of personal injury by accident. This too was declined by a Review Officer. An appeal was lodged. Mr McHardy did not pursue the s 28 argument. 
There was a hearing before the Authority in August 1994. In a reserved decision delivered on 2 February 1995, the appeal was allowed. The Authority determined Mr McHardy suffered from personal injury by accident entitling him to cover under the Act. The required leave to appeal against the decision to this Court was granted on 22 August 1995. 
There is no question but that Mr McHardy had an anxiety depressive illness. The sole issue throughout the proceedings has been whether in terms of the statutory framework he suffered personal injury by accident which entitled him to Accident Compensation cover. 
In a careful and detailed decision the Appeal Authority outlined the history of this case. It adopted a background summation which had been articulated by the Court of Appeal in McHardy v Wilkins & Davies Marinas Ltd (in receivership) & Ors (CA54/93, 7 April 1993). The Authority referred to the available medical evidence and concluded: 
“It is clear from the medical evidence that Mr McHardy enjoyed good health prior to the events which lead to his mental illness. There is no evidence of previous episodes of depressions or any disposition to depression. In his report of 24 May 1993 Dr Ogg said that in his view the state of depression suffered by Mr McHardy with its heavy overlay of anxiety, tension and other symptoms was always the result of acute and/or chronic stress. It was his opinion that Mr McHardy suffered from severe psychological trauma as the result of identifiable incidents and attacks and abuse which lead to the [(1996) 1 BACR 198, 200]specific disorder. I have no hesitation in finding on the medical evidence that it was the series of events surrounding his purchase or attempted purchase of the Westpark Marina which caused his injury. 
With those findings the issue then becomes whether that series of events were a process or were an accident …  
As has been emphasised by the High Court and the Court of Appeal in the cases which I discussed earlier in this decision, the entitlement to cover under the Act arises from personal injury by accident not personal injury by an accident. Was Mr McHardy in this case accidentally injured? I determine that he was. I determine that the identifiable triggering incident was the bank's refusal to finance the transaction in May 1990. ”
The appeal involves two questions. First, whether the Appeal Authority erred in finding that a depressive illness resulting from bad fortune could be a personal injury by accident for the purposes of the Act. 
Alternatively, whether in the circumstances of this case the Appeal Authority erred in finding that the depressive illness suffered by Mr McHardy resulted from an accident as opposed to being the resuIt of a continuous process. 
Mr Wilson presented his case upon the basis that although the Corporation subsequently reserved the right to argue to the contrary, for the purposes of this hearing the decision of the Court of Appeal in ACC v E [1992] 2 NZLR 426Has partially negative history or cases citing, but has not been reversed or overruled[Yellow]  that “mental disorder may be personal injury by accident for the purposes of the Act even though a separate causative unexpected event cannot be identified” was the law. 
Any consideration of the first question must begin by reference to the relevant Court of Appeal decisions. The base question is whether a depressive illness which is attributable to a business collapse can be a personal injury by accident. 
Mr Reid contended that the Accident Compensation Appeal Authority had correctly identified the situation by focusing not on the nature of the event as being determinative, but looking at the total consequences flowing. He submitted that there were cases including Re Firmstone: Decision No 1011 (1983) 4 NZAR 62Has Cases Citing which are not known to be negative[Green] ; and L v ACC (supra) which showed that various events and incidents (all of which had produced mental consequences) could fall within the definition. 
On the other hand the appellant emphasised the concept of an event and its circumstances. 
Counsel began by reference to the classic definition of Lord Macnaghten in Fenton v Thorley & Co Ltd [1903] AC 443, 448 that Has Cases Citing which are not known to be negative[Green] an accident is: 
“an unlooked-for mishap or an untoward event which is not expected or designed. ”
Mr Wilson contended that the word “expected” was to be interpreted in the sense of “foreseeable” rather than “likely”. He submitted that such a threshold was necessary to ensure that there did not come within the definition a multitude of incidents which could not possibly be regarded as accidental. The appellant contended that it was always foreseeable (even if unlikely) that by entering into commercial arrangements of the sort in which he became involved, Mr McHardy could suffer a financial reversal especially when he had no sufficient contractual safeguards in place.[(1996) 1 BACR 198, 201] 
For a period of almost 5 years, Mr McHardy was Consultant Chief Executive to Westpark Marina Ltd. In September 1989 he agreed to buy all the shares in that company. He settled the deal in November 1989 by paying $1 million by way of deposit. Just a month or so later, Wilkins & Davies Ltd, which was a 50 percent mortgagee, went into liquidation with massive losses. Mr McHardy contended that Westpac Banking Corporation to whom he looked for finance was at the time in serious financial trouble with losses in the billions. 
In May of 1990 the liquidator of Wilkins & Davies Ltd advertised the Marina for sale despite the shares being owned outright by Mr McHardy. There was not evidence as to the basis upon which the liquidator could so act. 
It appears inevitable that there must have been some default by the respondent as suggested by Mr Wilson. Be that as it may, 10 days later, Mr McHardy contended that he sought and was granted a month's extension to restructure his finances. Subsequently, without warning, this accommodation was withdrawn and foreshortened to only 72 hours. Shortly thereafter the mortgagees refused to negotiate further unless the respondent's wife's assets were pledged. The respondent's evidence was there were various acts of threatening, intimidating and abusing. Eventually all negotiations were called off. About this time he suffered a mental collapse. There followed a raft of litigation culminating in Mr McHardy's bankruptcy. Although this was the subject of challenge as far as the Court of Appeal, that situation was unchanged although in the fullness of time he obtained an unconditional discharge. 
Mr Wilson a number of times drew attention to the fact that Mr McHardy at no stage has commenced, let alone succeeded, in any litigation against the bank or anyone else with whom he had financial dealings which he contends created his disaster. 
In a nutshell, it was submitted that there was always the possibility when involving himself in this sort of financial and property dealing that he would suffer a reverse. It was said to be a misconception of the words “accident” to suggest that it covered this type of activity. 
Particular reference was made to Green v Matheson [l989] 3 NZLR 564, a case which needs to be read in tandem with the decision of the Court of Appeal delivered at the same time in Willis v A-G [1989] 3 NZLR 574Has Litigation History which is not known to be negative[Blue] . In Green v Matheson the President in delivering a judgment of the five-person Court said (at pp 571, 572): 
“[Personal injury by accident] cannot include harm to financial or property interests or reputation, even though the damages recoverable for that kind of harm may include in some cases redress for injured feelings or disappointed expectations. For instance the Act can have no bearing on actions for damages for breach of ordinary commercial contracts or defamation. No one would normally describe such events or their consequences as personal injuries by accident and the purpose of the Act clearly does not warrant a strained interpretation bringing them within that description. ”
As those words make clear, it is both the events and their consequences which are within the rubric of personal injury by accident. 
The duality is emphasised also in Willis v A-G at p 579: 
“But to make the Act work as parliament must have intended … we think that the clear rule must be adopted that any claims for any kind of damages for false [(1996) 1 BACR 198, 202]imprisonment alone and for any distress, humiliation or fear caused thereby are outside the scope of the accident compensation system and unaffected by the Act. If such mental consequences have been caused by both false imprisonment and assault or battery, a plaintiff can still claim damages for them. It is enough if the false imprisonment has been a substantial cause. ”
What the Court recognised, was that as well as determining whether there were consequences, one had to look at the nature of the event. 
The respondent placed great reliance on the subsequent decision in ACC v E particularly the statement of Greig J in the High Court cited with approval in the Court of Appeal (at p 432) when he said: 
“But it is still personal injury by accident when the event or activity, or the incident is designed and intended and may have usually unremarkable results. The accident in that case is the unexpected and unintended consequence and is equally an accident as that in which the result or injury is the inevitable and unexpected [sic] consequence of an unforeseen event. ”
The Authority's decision was predicated on the basis of the finding noted above that the identifiable triggering incident was the bank's refusal to finance the transaction in May 1990. I am of the view that it was a matter outside of the purview of the statutory scheme because it is outside what is commonly understood as personal injury by accident using the natural and ordinary meaning of that phrase. The fact that as a result of his financial collapse Mr McHardy suffered a depressive illness does not create an entitlement to cover. 
I therefore conclude that there was a flaw in the reasoning adopted by the Accident Appeal Authority and that the appeal must succeed on the first ground. 
In deference to the careful argument advanced on both sides I turn to consider the alternative submission. 
The fundamental issue here is the distinction which is to be drawn between continuous process and accident. Counsel agreed that a useful starting point was the decision of the English Court of Appeal in Roberts v Dorothea Slate Quarries Co Ltd [1948] 2 All ER 201Has Cases Citing which are not known to be negative[Green]  where Lord Porter said (at p 205): 
“In truth, two types of case have not always been sufficiently differentiated. In the one type, there is found a single accident followed by a resultant injury, as in Brintons Ltd v Turvey [1905] AC 230Has Cases Citing which are not known to be negative[Green] , or a series of specific and ascertainable accidents followed by an injury which might be the consequence of any or all of them, as in Burrell (Charles) & Sons Ltd v Selvage (1921) 90 LJKB 1340. In either case it is immaterial that the time at which the accident occurred cannot be located. In the other type, there is continuous process going on substantially from day to day, though not necessarily from minute to minute or even from hour to hour, which gradually and over a period of years produces incapacity. In the first of these types, the resulting incapacity is held to be injury by accident. In the second it is not. ”
A similar course of reasoning was adopted by the New Zealand Court of Appeal in ACC v E (supra) where it was noted in particular (at p 433): 
“It will be a matter of fact and degree in any case as to whether an occurrence not confined to a short time can be said to constitute an accident (or series of accidents) rather than a process. ”
[(1996) 1 BACR 198, 203]
The Court noted on the facts the importance of the particular circumstances of an individual piece of litigation, but what is always essential is a triggering incident which is properly capable of being labelled as an accident or a series of accidents. I have already found that what the Authority identified under this head, could not come within the purview of the cover provided as that has been interpreted. 
Mr Reid placed particular emphasis upon ACC v E and L's case referred to above. In my judgment, although ACC v E requires that the provision be read in a generous and non-technical way, there must be a link between an event which is capable of triggering and a demonstrable injury. Similarly I interpret the Appeal Authority's decision in L as holding that the making of the allegation of sexual abuse and the persistence with the allegation over a period of 2 1/2 years was a triggering incident. The effects of the extraordinarily unusual 4-day management course in ACC v E is similar. The earlier Accident Compensation Appeal Authority case of Firmstone (albeit one involving a pre-existing disposition) also had an identifiable triggering event from which the consequences could properly be said to flow. 
The Appeal Authority in the instant case determined that (at p 19): 
“the initial depressive illness was caused by the identifiable series of events taken place within the preceding few weeks of 15 August 1990. ”
Mr McHardy in his initial letter of claim dated 29 September 1992 asserted: 
“In brief I was threatened with an unjustified complaint to the Police of fraud and my wife (who was not involved) and myself threatened with bankruptcy proceedings. I collapsed under the strain of this attack and had to give up through my illness my long established legal practice, other business interests and a wide range of community interests where I had been active for over 30 years …  
Both my Doctor and my Specialist are of the clear view that had it not been for the severity of the threats against me and my wife I would not have collapsed. ”
At this time there was a certificate from his general practitioner, Dr Hewitt, which indicated: 
“Collapse under pressure and threat of criminal and bankruptcy threats. ”
The Commission has not sought any independent medical assessments itself. It has been content to deal with the opinion provided by Dr Ogg, a specialist psychiatrist. In his first report following the referral by the General Practitioner he said: 
“When I saw him initially I felt there was no doubt about his [Dr Hewitt's] diagnosis. He certainly was suffering from chronic excessive stress which was manifesting with the typical syndrome of psychological depressive disorder. ”
I accept Mr Wilson's submission that what is there portrayed is a continuing process which emerged as his business and professional life disintegrated about him. For a man with his background and disposition this almost inevitably led to the ultimate breakdown of his health. I am persuaded that this is not an acute or sudden trauma but rather a manifestation of chronic stress.[(1996) 1 BACR 198, 204] 
A further critical piece of evidence in my judgment is the letter 24 May 1993 from Dr Ogg to the appellant which said: 
“It is my view that this state of depression with its heavy overlay of anxiety, tension and other symptoms mentioned is always the result of acute and/or chronic stress. 
In reviewing the history of the matter up to that point I came to the conclusion that the stressor which led to the disorder was the attack upon Mr McHardy (in a commercial sense) with the admixture of personal abuse and threats …  
It is my view that the disorder that Mr McHardy developed as a result of severe personal stresses put upon him and that this occurred over a short period of time and was occasioned by the abuse and threats and loss of large sums of money. 
I believe the condition was then exacerbated and continued by recurrences of those inimical factors. 
I have canvassed with Mr McHardy and with his wife separately the possibility that other stresses and traumas were involved but I found no evidence of any such, and hence my conclusion that the threats and abuse as mentioned are the causative factors. 
It is on this basis that I suppose Mr McHardy's claim for personal injury by accident of psychological trauma. ”
The alternatives of “acute and/or chronic stress” are left unresolved although I note that in his conclusion Dr Ogg said: 
“It is my opinion that Mr McHardy suffered from severe psychological trauma as a result of identifiable incidents and attacks and abuse which he suffered and which led to a specific disorder within a very short period of time and which has continued. ”
This information provided to the Corporation is to be contrasted with what Mr Ogg said in an affidavit sworn in the High Court in the bankruptcy proceedings dated 9 February 1993: 
“The type of depressive illness shown by Mr McHardy is in my opinion always due to a long period of persistent and excessive stress. ”
Mr Wilson also relied on Mr McHardy's own evidence, both at the appeal hearing and on the bankruptcy proceeding in which he catalogues the 5 years prior to the onset of his illness. 
When one objectively analyses the history and the background of the respondent, his financial and commercial dealings after 1985, and the exacerbation which occurred in 1990, in my judgment it is not open on the basis of the evidence (both Mr McHardy's evidence and the medical evidence) to conclude that there had been a sudden and unexpected intervention. The mental breakdown and the psychological impairment which he undoubtedly endured following the collapse of his world, are consistent with a process extending over a sustained period. 
Consequently even if I had been of the view that the bank's refusal to finance could have been an identifiable trigger incident of the type covered by the Act, then on the totality of the evidence I would have concluded that it was not open to the Authority to hold as a matter of fact that such a trigger incident had occurred. 
Mr Wilson indicated in the course of the hearing that irrespective of the outcome, the appellant would not seek costs. In my judgment that was a proper position for the authority to take. This case is about statutory [(1996) 1 BACR 198, 205]interpretation. Mr McHardy undoubtedly suffered a serious and debilitating illness. Like any other citizen he was entitled to make a claim and to endeavour to bring himself within the statutory framework of the Act as it has been interpreted by the Courts. There was never any suggestion that he had any entitlement to compensation for the financial losses which he had personally incurred. The Authority was of the view that he brought himself within the Act's cover. I have reached a contrary conclusion but that is no reason for any litigant to be pilloried or harassed. It is to be remembered that he was in this Court merely as a respondent and not of his own making. 
The appeal is allowed. 

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