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Accident Compensation Cases

ROGERS v ACCIDENT REHABILITATION AND COMPENSATION INSURANCE CORPORATION (HC, 11/08/97)

Judgment Text

JUDGMENT OF MASTER ANNE GAMBRILL 
MASTER ANNE GAMBRILL
I have before me an application to strike out an amended Statement of Claim. The Defendant seeks the striking out of the cause of action pleaded against the Accident Rehabilitation & Compensation Insurance Corporation which alleges misfeasance in a public office by the Corporation and/or its Officer, Mr Cattermole, and if the cause of action is not struck out, then the Defendant seeks the claim for exemplary damages be struck out. The Plaintiff is not legally aided and in accordance with agreement with the Counsel, costs on the application are presently reserved. Counsel has leave to either file memoranda or see me in Chambers in November to settle the costs. 
The Corporation exercises statutory functions under the Accident Rehabilitation & Compensation Insurance Act 1992 and is the statutory successor to the Accident Compensation Corporation. 
The chronology of events giving rise to the Plaintiff's claim can be found in the Statement of Claim and Statement of Defence and there appears there is no real dispute. The application did not need to rely on affidavit evidence under the 1982 legislation. On 1 June 1982 the Plaintiff claimed under the name of Clive Laurence Ilich in relation to a back injury. The claim was settled. Earnings related compensation was paid to the Plaintiff until he returned to work and he sought private hospital treatment. On 16 July 1984 the Plaintiff was involved in a work accident which resulted in an upper thoracic strain to his back. He applied under the name “Paul Rogers” for ACC cover and earnings related compensation. The claim for cover was accepted and earnings related compensation was paid from 23 July 1984. On 12 May 1986 he was awarded lump sum compensation for $6,000 pursuant to s 79 of the Act and $2,550 for non-economic loss caused by permanent impairment of bodily functions under the claim made by P Rogers. The Plaintiff sought review of these lump sums and after a hearing before a Review Officer in October 1986, lump sum payment under s 79 was increased to $8,000. 
During 1987 and 1988 the Plaintiff was paid earnings related compensation on the second claim. The Corporation became aware he was using two names, ie Ilich and Rogers, and two IRD numbers in respect of his claims and possibly drawing two entitlements. On 16 August 1988 the Corporation wrote to the Plaintiff temporarily suspending his weekly income pending investigation. No query was made of this decision. On 21 October 1988 the Plaintiff was convicted on 24 charges of obtaining the painkilling drug Temgestic under false pretences. He was convicted and fined. 
The Plaintiff received the sickness benefit from Income Support Services between 26 July 1990 and 11 July 1991. On 10 July 1991 the Plaintiff was convicted on a further 15 charges in respect of the drug Temgestic. It is unclear to the Court whether the drug was obtained in 1988 or subsequently. He was convicted on a charge of false pretences, served imprisonment for three months from 10 July 1991 to 5 October 1991 when he was released following an appeal when the sentence was varied. The Plaintiff then received a sickness benefit from 16 October 1991 to 6 December 1995. 
In 1988 and 1989 the Corporation conducted investigations on the Plaintiff's file and on 26 July 1989 the Plaintiff's file was closed. On 16 May 1989 the Plaintiff was admitted to hospital with an ankle injury which he incurred playing tennis. The Plaintiff, when completing forms in the hospital I am told, claimed under his real name Clive Ilich. He was awarded lump sum payments of $5,204 pursuant to s 78 of the Act and $7,000 pursuant to s 79 of the Act in respect of this third accident. 
In March 1994 the Plaintiff applied under the name Paul Rogers to have his earnings related compensation payments relating to the 1984 back injury reinstated. He requested back payment to 1988 and this was the first step he took to question the suspension of his earnings related compensation since notice was given six years earlier. The Corporation declined the request for back payment. The Corporation said it made a valid decision to suspend the earnings related compensation payments in 1988 and the Plaintiff had delayed/failed in bringing his application for review. 
On 20 February 1995 the Plaintiff applied for a review of the Corporation's decision to decline to reinstate and back-date earnings related compensation. At the hearing on 1 June 1995 further information from the claimant was then presented. The Review Officer allowed the late filing of the review and endorsed the back-payment of earnings related compensation to 16 August 1988. The Plaintiff appealed to have the quantum increased. He appeared before the Accident Corporation Appeal Authority in June 1996 and was successful. He therefore has received from the Corporation the back payments for earnings related compensation from 16 April 1996 to the present, home help of $140.00 per week, $12,000 towards the purchase of an automatic car with power steering, $1,700 for deterioration under s 78 and an independence allowance. 
The Plaintiff says the Defendant must satisfy the Court that the cause of action, the misfeasance in public office, cannot be sustained and whether the actions could give rise to aggravated or accessory damages. The Plaintiff's case is the Defendant acted arbitrarily suspending the earnings related compensation, failed to conduct proper inquiries, used private investigation agencies and referred material to the Police. His Counsel suggested there is evidence before the Court that the Corporation colluded with the Police so that drug charges were brought which resulted in the cessation of earnings related compensation and further compensation after his release from prison, or the Court can infer this to be the case from the facts as pleaded. 
The Plaintiff alleges the additional facts that the Defendant gave notice to medical practitioners and pharmacies in Auckland to prevent the Plaintiff obtaining Temgestic, but it is clear from the Statement of Defence the Department of Health gave the notice. The Plaintiff says the Defendant's Officers failed to return his telephone calls. The Corporation's own Review Officer found the Plaintiff would have been entitled to earnings related compensation. The Plaintiff alleges the Area Manager had no actual appreciation of the harm which would be caused to the Plaintiff by his actions or was recklessly indifferent to the consequences. The denial by the Defendant of this is the Plaintiff says irrelevant. The Plaintiff says in his pleadings that he informed the Corporation of the jeopardies he was placed in by the failure to pay the earnings related compensation. It forced him to sell his home, his furniture and other assets at a loss and damages for these losses are entirely outside the scope of the Act. The Plaintiff's case is the closing and archiving of his file without further notice, the promoting of his arrest and conviction, was engineered as a means of avoiding the duty to properly investigate his entitlement to a fair conclusion and it amounts, the Plaintiff says, to outrageous conduct and the tort of misfeasance in public office. He says the Area Manager was consciously or recklessly abusing the power he held as an officer of the Corporation with the likelihood that the mortgagee's sale of the Plaintiff's house, the forced sale of assets and other consequences pleaded would result. 
There is no affidavit evidence. The Plaintiff will have to prove the allegations made. The Defendant's case rests on its denial of the effect of its actions. The closing of the file is not disputed. 
Counsel by agreement produced a letter from the Corporation dated 16 August 1988 sent to two separate addresses and there appears to be no doubt it reached the Plaintiff. It is headed 
“RE: Continuing Entitlement to Compensation. 
The Corporation has been conducting a review of your file and has decided to suspend future payments of Earnings Related Compensation pending further investigation. 
This action is being taken for the following reasons, firstly that you failed to disclose a previous claim for a back injury which could affect the entitlements on this claim. 
Secondly, Inland Revenue records disclose that your annual tax returns indicate a level of pre accident earnings which are at variance to the earnings figures supplied by your employer at the time of the accident. 
Thirdly, the Corporation has reason to believe that you may have been in receipt of post accident income which you have failed to declare, this could affect your on going entitlement to weekly compensation. 
Fourthly, you live at the same address and have the same occupation and type of injury as another of our clients and we have reason to doubt the veracity of that persons claim. 
Once our investigations have been completed I will contact you again. ”
Both Counsel accepted the principles set out in the text McGechan on Procedure, High Court Rules Rule 478, recognising the jurisdiction to strike out should be exercised sparingly and only in a clear case. The Defendant must persuade the Court the Plaintiff's case is so clearly untenable it cannot possibly succeed. The Court can determine difficult questions of law. The Court, as in this case, is to determine the matter primarily on the pleadings. The Court is satisfied it has the requisite material in the pleadings amplified by some incidental factual matters which are not in dispute. The Court has been assisted by the arguments of Counsel in the carefully prepared submissions as to the law of misfeasance and its applicability in the present factual context. 
The Plaintiff claims under the heading of Misfeasance, that an Officer of the Corporation deliberately acted without power and with knowledge of the particular consequences of the Act to the detriment of the Plaintiff. The Defendant's case is that the allegations in paras 16 and 17 of the amended Statement of Claim refer to everything the Corporation and its Officers did, which was within the powers and was in accordance with the 1982 Act. The Act provides a complete statutory scheme where any actions which are incorrect may be remedied on review or appeal which right the Plaintiff has now exercised. Alternatively, Counsel says if the Court looks behind statutory schemes the necessary ingredients of the common law doctrine of misfeasance are not present on the Plaintiff's pleading. 
Application in relation to the statutory scheme 
The Plaintiff is now deemed to have cover under the 1992 Act and the provisions of the 1982 Act relating to earnings related compensation, ss 59 - 64 Reviews and Appeals, Part IX, continued to apply. Counsel for the Defendant outlined the review and appeal rights under Part IX of the Act which the Plaintiff has exercised. Counsel relied on s 101 (4) of the 1982 Act which provides: 
“Where a remedy by way of review or appeal is provided under this Part of this Act, no other remedy shall be available. ”
He says the question to be determined is the extent to which s 101 (4) excludes resort to common law proceedings against the Corporation when those proceedings are integrally related to a decision concerning rehabilitation assistance or compensation which is reviewable or appealable under Part IX of the 1982 Act. He analysed the interacting principles which influence a Court's decision on the breadth of a statutory ouster clause. First, the Court's jurisdiction may be ousted by the plain words of the enactment. This principle is simply a recognition of the sovereignty of Parliament and the separation of powers doctrine. In Smith v. East Elloe Rural District Council [1956] AC 736 at 750-751, Viscount Simonds expressed the principle as follows: 
“[A]nyone bred in the tradition of the law is likely to regard with little sympathy legislative provisions for ousting the jurisdiction of the court, whether in order that the subject may be deprived altogether of remedy or in order that his [or her] grievance may be remitted to some other tribunal. But it is our plain duty to give the words of an Act their proper meaning …  ”
The second principle is that ouster clauses are to be interpreted strictly. In Anisminic Ltd v. Foreign Compensation Commission [1969] 2 AC 147 at page 170 Lord Reid said: 
“It is a well established principle that a provision ousting the ordinary jurisdiction of the court must be construed strictly — meaning, I think, that, if such a provision is reasonably capable of having two meanings, that meaning shall be taken which preserves the ordinary jurisdiction of the court. ”
Counsel submitted that s 101 (4) is a statutory ouster or exclusion clause which excludes the common law causes of action including misfeasance. The crucial wording of s 101(4) is that no other remedy is available “where a remedy by way of review of appeal is provided”. Counsel said one must question what the remedy is for. He answered the question by saying the only remedy must be a flawed decision by the Corporation. His submission was that civil proceedings which stem from a decision which is subject to review or appeal under Part IX of the 1982 Act are excluded by s 101(4). He submitted that s 101(4) is not by its phraseology limited to situations where there would be double recovery. It provides that where a remedy by way of review or appeal is provided, no other remedy shall be available. He noted the damages the Plaintiff seeks are integrally related to the compensation payments he says he should have received and in relation to which he has now been granted remedies on review and appeal. The damages relate solely to the suspension and cancellation of the Plaintiff's earnings related compensation. Counsel submitted the Plaintiff acknowledges this to be so in the opening words of para 16 of the amended Statement of Claim. He argues that this being the case, remedies are provided under the Act and the common law suit is at Parliament's direction, not available. It is part and parcel of the social contract the Accident Compensation Scheme represents that no common law suit is available where there is cover under the Act. See: Childs v. Hillock [1993] NZAR 249. He said the point is reinforced by the wording of s 101 (4) and s 8 (1) which provides: 
“The Corporation shall have such functions and powers in relation to the administration of this Act as are conferred upon it by this Act, and shall also have such further powers, not inconsistent with this Act, as are reasonably necessary for the effective performance of its functions. ”
The Corporation exercises the powers. The remedies are available under the Act. The Corporation was not acting outside its powers which is a necessary ingredient if it is thought that despite s 101(4) the common law remedy of misfeasance ought to be available to the Plaintiff. 
Counsel traced the history of the relevant sections relating to appeals and reviews, and the amalgam of s 73 in the 1992 Act which applies from the introduction of that Act, to decisions to suspend or cancel. 
The Defendant's argument is however the powers were exercised, even wrongly, poorly, negligently or improperly, the remedies to a dissatisfied claimant are under the Act. There are three rights of appeal. The Plaintiff exercised these rights and Counsel says, having exercised these rights and accepted the compensation, he has no right to damages which are not available for consequential loss. 
He gave consideration to Pearce v. Accident Compensation Corporation (1991) 5 PRNZ 297 where the Plaintiff was paid earning related compensation by the Accident Compensation Corporation between 1984 and 1988. Pearce sought five reviews and ultimately succeeded in having the quantum increased. The payments then ceased between 1987 and 1988 and the ACC hired a private investigator to monitor the Plaintiff pending a hearing a review and a second decision was made to suspend. The Plaintiff claimed the ACC had breached a duty of care to promote his rehabilitation and claimed exemplary damages for “high-handed, contumelious and contumacious conduct”. Penlington, J gave careful consideration to the statutory framework, the hierarchy of reviews and appeals and held that — 
“ … the combined effect of ss 27(3), 101(4) and the hierarchy of rights of review and appeals available under the Act excludes any right of action at common law for alleged negligence in carrying out the statutory duties prescribed …  ”
Whilst the Plaintiff originally attempted to plead negligence in this case, the amended pleading has no longer a claim in negligence. Penlington, J also gave in depth consideration to Jones v. Department for Employment [1989] QB 1, a case where the Courts recognised that the Plaintiff's rights were restricted to the hierarchy of reviews and appeals provided for in the statute. The Court refused to recognise any common law duty of care and Penlington, J adopted the ratio decidendi in Jones v. Department for Employment (supra) and concluded no duty of care existed at common law in relation to the carrying out by the Corporation of its duties under the Act. He struck out the cause of action alleging negligence. 
The statement of Gildwell, LJ in that case gives rise to the claim which the Plaintiff has presently formulated. His Honour said — 
“It is my view the adjudication officer is not under any common law duty of care. In other words, I agree with Counsel for the Department, that his decision is not susceptible to challenge at common law unless it can be shown he is guilty of misfeasance. ”
Counsel submitted that any argument on the basis of Jones which would allow a Plaintiff to pursue an action in misfeasance would be misconceived for two reasons — 
“(a)
The statement was made in the context of whether there was a common law cause of action regardless of whether there was a finality clause. There was no complete statutory scheme. 
(b)
Alternatively, even if a misfeasance statement was made with a finality clause in mind, the particular clause would not or, at least should not, have excluded an action for misfeasance because there could have been a jurisdictional error (bad faith) such as, no ‘decision’ had been made which would mean the finality clause could not be invoked. ”
Counsel noted s 101 (4) is not equivalent to and has broader application than a finality clause. He argued the fact that bad faith or dishonesty is an element of the cause of action makes no difference. He relied on Cheyne Developments Ltd v. Sandstad (1986) 6 NZAR 65. He argued that s 101 (4) does not preclude an action in misfeasance because the Plaintiff's claim is not for the compensation he should have received but for losses above and beyond that compensation and for general and exemplary damages. He suggested that s 101(4) is not by its phraseology limited to situations where there could be double recovery. Section 101(4) provides that where a remedy by way of review or appeal is provided, no other remedy shall be available. 
Counsel's submission was that the clear wording of s 101 (4) means that no other remedy is available. He submitted this was supported by the cases cited in support. He said the social contract is a deliberate and complete package. To allow claims for misfeasance to be considered would be to erode the scheme. The Court could distinguish Jones which was not applicable on the wording of our statute. He said that if that submission was not accepted and the Court considered an action in misfeasance ought, despite the terms of the legislation, be available in theory, then the tort upon the Plaintiff's pleading cannot succeed. 
The basis of the allegations is that pursuant to the Acts, the Corporation owed particular duties to the Plaintiff. The Corporation, by its Officer and Area Manager Mr Cattermole, knew or ought to have known he deliberately and wrongly acted in abuse of his powers in a particular way (none of which have the necessary ingredient of deliberate intention to cause harm the Defendant says). The Corporation by Mr Cattermole, knew or ought to have known the Plaintiff would suffer harm because of the several telephone inquiries made by the Plaintiff. Counsel submits there is no pleading, nor can there be, of a deliberate intention to cause the loss claimed. 
The Plaintiff pleads the Corporation gave notice of the suspension of earnings related compensation without advising rights of review, suspended the earnings related compensation without a full and fair and complete investigation, did not give notice of the results of the investigation, cancelled the earnings related compensation without notice, did not respond to telephone inquiries and commissioned private investigators despite contrary internal legal advice from the Corporation solicitor. The investigators communicated information to the Police and used the Plaintiff's arrest and anticipated conviction as a ground for cancellation of his earnings related compensation. As an additional ground of complaint, and I understand the matter is still under consideration/review, the Corporation failed to give notice of the outcome of Judge Trapski's inquiry into a physician's conduct. Mr Gluckman was the subject of a major investigation by the Corporation because of his conduct towards his patients. I understand his name has been removed from the medical roll and the Corporation has, in some instances, paid compensation because of his actions. The inquiry by the retired District Court Judge Trapski was into the physician's conduct, not into the Plaintiff's conduct. The issue as to whether the Plaintiff is entitled to compensation for the actions of the physician has not yet been finally resolved. 
Counsel submits that on the facts the allegations as made do not amount to deliberate acts or malicious acts and they are therefore unsustainable. 
He analysed with care the tort of misfeasance. He noted it is a creature of public law and is the only tort applying to public officials alone. It has its origins in the premise that public powers are to be exercised for the public good and to provide a remedy in certain cases of unlawful administrative action. The tort is concerned with a deliberate and dishonest wrongful abuse of the powers given to a public officer. He said the limits of the tort have been clarified to an extent by recent decisions of the English High Court, Australian High Court and New Zealand Court of Appeal in Three Rivers District Council & Ors v. Bank of England (No.3) [1996] 3 All ER 558; Northern Territory v. Mengel (1995) 60 ALJR 572; Garrett v. Attorney General CA129/96, 19 December 1996; Sanders v. Snell [1997] 143 ALR 425
He analysed the elements of tort. He said misfeasance would be committed when a public officer acted in purported exercise of his or her office, abused his or her powers by either acting with (targeted) malice towards the Plaintiff or acting knowingly or subjectively recklessly ultra vires, knowing the particular damage which would be caused and thereby causing it. Counsel analysed the authorities describing a “public officer”. He noted that the tort was directed primarily at personal liability because of the need for a requisite state of mind constituting an abuse of power. He relied on a statement of Blanchard, J in Garrett (supra) at page 32: 
“ … the abuse of power has to be alleged against a particular person or persons, not against the police generally … it is not enough to lump a group of officials together and to attribute to them constructively the knowledge of one of their subordinates. ”
Counsel said there must be an individual with the requisite state of mind who is alleged to be personally liable with a pleading of vicarious liability as a result. He said there was nothing of this nature in the pleading; it is simply said that the Corporation by Mr Cattermole acted outside power. This is insufficient the Defendant's Counsel submits to sustain a claim for misfeasance. 
There has been some discussion as to whether the tort is limited to an abuse of office by exercise of a statutory power but Morris, J has held that prerogative powers were sufficient. See Davidson v. King & Attorney General [1995] NZFLR 116 at 126. It is common for the tort and allegation of the tort to be formulated as requiring a separate element, that is, that the public officer owes the Plaintiff a duty as to how his or her office should be exercised, ie there may be a duty not to commit the particular abuse complained of. However, in Garrett (supra) the Court of Appeal said that if there was a requirement for a duty of care — 
“ … it would move the tort right into the area occupied by the torts of negligence and breach of statutory duty and leave little room for its separate operation. ”
An essential element of the tort is that the public officer is acting in the exercise or purported exercise of his or her office at the relevant time. See Garrett (supra) at page 603: 
“The essence of the tort … is that someone holding public office has misconducted himself [or herself] by purporting to exercise powers which were conferred on him [or her] not for his [or her] personal benefit but for the benefit of the public or a section of the public either with intent to injure another or in the knowledge that he [or she] was acting ultra vires …  ”
Abuse of Powers with targeted knowledge 
Counsel analysed the pleading. Acting with malice towards the Plaintiff and acting knowingly ultra vires are alternative fault elements establishing misfeasance. “Acting” includes acts of commission and omission. See Garrett (supra) at page 604. Counsel appeared to accept there was no element of targeted malice in this case. The Defendant says there was no allegation of ill-will or corrupt or improper motives but the Plaintiff's Counsel submits there were improper motives in facilitating the Plaintiff's convictions for obtaining prescription drugs. However, recent decisions have assisted in clarifying the grounds on which an alternative fault requirement can arise in misfeasance The Plaintiff must prove that the Corporation knew or was reckless as to whether he or she had no power to do, or refrain from doing, the act complained of, and that the act or omission would probably injury the Plaintiff. Clarke, J in the Three Rivers case (supra) identified these elements as follows: 
“(3)
… the officer knows that he has no power to do the act complained of, it is sufficient that the officer has actual knowledge that the act was unlawful or, in circumstances in which he believes or suspects that the act is beyond his powers, that he does not ascertain whether or not that is so, or fails to take such steps as would be taken by an honest and reasonable [person] to ascertain the true position. 
(4)
For the purposes of the requirement that the officer knows that his act will probably injure the plaintiff … it is sufficient if the officer has actual knowledge that his act will probably damage the plaintiff or such person or, in circumstances in which he believes or suspects that his act will probably damage the plaintiff … if he does not ascertain whether or not that is so, or if he fails to make such inquiries as an honest and reasonable [person] would make as to the probability of such damage. 
(5)
If the states of mind … do not amount to actual knowledge, they amount to recklessness which is sufficient to support liability under the … tort. ”
Recklessness must be subjective recklessness, not objective recklessness. He also noted that constructive knowledge is insufficient. The Court of Appeal agreed with Clarke, J's conclusions and set out in depth in the judgment in Garrett (supra) at page 28 the criteria which provide the element of accord. The official must have an actual appreciation of consequences for the Plaintiff. There must be actual, or in the case of recklessness, presumed intent to transgress the limits of power. The purpose behind the tortious liability is to prevent the deliberate injuring of members of the public by deliberate disregard of official duty. 
“It is the absence of an honest attempt to perform the functions of the office that constitutes the abuse of the office. ”
Per Brennan, J in Mengel (supra). 
As to the element of causing damage to the Plaintiff, Counsel analysed the two issues 
(a)
causation; and 
(b)
recoverable damage. 
The Courts have appeared to adopt the test in considering the alleged misfeasance whether the act or omission was an effective cause of the particular loss. Cooke, P in Fleming v. Securities Commission [1995] 2 NZLR 514 has said that: 
“ … whether damage and fault are sufficiently connected for liability is a question of fact and degree. ”
Counsel noted that Clarke, J applied these principles in Three Rivers (supra): 
“ … a plaintiff can succeed if he proves that the Corporation maliciously intended to injure him and that he has suffered loss as a result … [or] … that the Corporation knew that his act or omission would probably cause the loss …  ”
He analysed whether the official knew that his act would cause loss and whether there is sufficient causation. He noted that the Courts have inferred a general duty on the Plaintiff to plead. particularly in claims of dishonesty or bad faith. See Prosser v. NZ Investment Trust Ltd & Ors [1937] GLR 93. Counsel relied on the decision of McKay, J in Rawlinson v. Rice CA246/96 dated 19 May 1997 where His Honour said: 
“The allegation that the Corporation acted with knowledge of his lack of jurisdiction does not normally require particulars. Particulars were required if actual malice, in the sense of spite or ill will, was to be alleged. ”
In this case the allegation is that the Corporation by Mr Cattermole acted deliberately and wrongly in abuse of power. This is more than was alleged in Rawlinson (supra) and particulars of deliberateness and wrongful abuse must be given. He said the particulars in para 17 are of a series of alleged acts and omissions but none of them come close to the requisite state of mind for misfeasance, nor is it explained how Mr Cattermole was acting outside his powers. Counsel's argument was that there was no reasonable cause of action in misfeasance because — 

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