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Accident Compensation Cases

Accident Rehabilitation & Compensation Insurance Corporation v Parahi (HC, 07/04/98)

Judgment Text

Ellis and McGechan JJ
The Appeal 
This is an appeal against a decision of the District Court at Napier delivered 27 November 1995 (decision no 137/95). It raises an issue as to the correct interpretation of s 40(2) of the Accident Rehabilitation and Compensation Insurance Act 1992 (“the Act”) as it stood after amendment by s 13 Accident Rehabilitation and Compensation Insurance Amendment Act (No 2) 1993. The question, in essence, is whether when effects of an old injury flare up again in disabling fashion, the quantum of earnings related compensation for that later disabling episode is to be assessed in the first instance looking back 4 weeks from recurrence of disablement under s 40(2)(a), or looking back 52 weeks under s 40(2)(b). While the section has been further amended since these events (s 8 Accident Rehabilitation and Compensation Insurance Amendment Act 1996) the decision may have some current significance. 
The Facts 
There is no dispute as to basic matters. The facts as found by the District Court, requiring an agreed correction on one aspect (words italicised) are as follows 
“appellant sustained serious injuries in a motor vehicle accident on 16 March 1985. Immediately prior to the accident she had been employed as a Secretary but lost her job because of the injuries she sustained. The appellant subsequently obtained full time employment in October 1985 but had to leave that job because of her injuries. In April 1986 she obtained a new position but as she required a further operation again lost her job in 1987. In 1988 she obtained part-time employment but in August 1989 was again put off work because of her injury. Earnings related compensation ceased in November 1990 when the appellant had become pregnant. On 16 August 1994 the appellant applied to the respondent for entitlement for loss of earnings. She stated that she was again incapacitated while working as a barmaid and gave details of her earnings for the four weeks immediately prior to 12 August 1994 when she had been certified as unfit for work because of the original injuries. The respondent made an assessment of earnings related compensation based on the appellant's earnings for the 12 months immediately preceding the accident of 12 March 1985. ”
The italicised words “the accident of 12 March 1985” should be “12 August 1994”
The Claimant sought assessment in the first instance on the basis of earnings during the 4 weeks prior to date of recurrence, invoking s 40(2)(a). The Corporation assessed on the basis of 52 weeks prior to date of recurrence, invoking s 40(2)(b). The Corporation at no stage sought to assess on the basis of any period calculated back from the original accident and incapacity 16 March 1985. On the particular circumstances and figures, the 4 weeks prior to 12 August 1994 yielded the best result. The 52 weeks, for much of which Claimant had been off work and on the DPB, yielded only the minimum assessment. 
The Legislation Then In Force 
Section 40(2) should be construed in immediate context. Summarising, s 37 provides a definition of “incapacity” —broadly, inability to engage in the employment undertaken at the time of the accident or in other suitable employment. Section 38 provides for compensation for loss of earnings where incapacity resulted from a work injury. Section 38(2), in particular, allows 80% of loss of earnings for the first week, paid by the employer in whose employment the work injury was suffered in respect of the week's loss of earnings from that employment or paid by the Corporation otherwise. Section 39 lays down the relevant percentage (80%) for compensation in respect of periods other than those covered by s 38. It is a precursor to s 40, which lays down a further compensation regime for certain earners, whether injured at work or otherwise, who have obtained earnings as an employee during the 12 months preceding the accident. Section 40 as then worded provided 
“40. Calculation of weekly earnings where earner had earnings solely as an employee during the 12 months before commencement of incapacity— 
This section applies only to earners who are earners immediately before the commencement of the incapacity and who, during the 12 months immediately preceding the commencement of the period of incapacity, had earnings as an employee and who did not also have earnings other than as an employee 
The weekly earnings of any person to whom this section applies shall be,— 
In respect of each of the 4 weeks next following the sixth day after the day on which the incapacity first commenced, the earnings as an employee during the 4 weeks immediately before the commencement of the incapacity divided by the number of full or part weeks of remunerated employment as an employee during that period 
In respect of any weekly period of incapacity after the period referred to in paragraph (a) of this subsection, 1/52nd of the earnings of that person as an employee during the 52 weeks immediately before the commencement of the incapacity ”
The District Court Decision 
The District Court took the Review Officer's decision appealed from as proceeding from an analogy drawn between s 38(2) and s 40(2), seen by the Review Officer as warranting application of s 40(2)(b) with reference to the period of incapacity preceding the accident in 1985. The District Court noted the Claimant's argument to the contrary as involving exclusion of reference to s 38 (work injuries), and as invoking s 40(2)(a) interpreted so as to refer back from the current period of incapacity for which the claim was made. The District Court dismissed reliance upon as 38 and 39, and continued 
“Section 40(2) then covers the position of a person who is an earner immediately prior to a period of incapacity and who has earnings as an employee only. Such a person is then entitled under s 40(2)(a) to have his or her weekly earnings assessed on the basis of earnings for the period of four weeks immediately before the commencement of the incapacity
I agree with [counsel for Claimant] that those words mean the period of incapacity for which the claim for weekly compensation is made and can in no way refer back to the earnings for the four weeks immediately prior to the accident. In my view s 40(2)(a) contemplates the very situation in which this appellant has become involved in that she has had various periods of incapacity dating back to the accident which occurred in 1985. I do not consider that the legislature had it in mind that after 9 years during which there have been various periods of earning and various periods of incapacity that a person's weekly earnings of some 9 years previously should be used in the calculation when immediately prior to the period of incapacity for which the claim is made the appellant has been receiving income at quite a different rate. I consider that the words of the section are quite clear and must be applied in their natural meaning. 
Accordingly, I consider that the submission made by [counsel for Claimant] should be upheld. The appeal is allowed and weekly earnings are to be assessed on the appellant's earnings for the four weeks immediately prior to the commencement of the incapacity in August 1994. There will be costs of $700. ”
It will be seen the District Court's decision was influenced considerably by an outcome perceived to follow from Corporation submissions which would involve disability recurrence assessments calculated by reference to earnings long ago at date of accident. 
The Corporation disavows any such outcome Its submission is (and it says, was) that s 40(2)(a) applies only to the first occasion of incapacity, and is inapplicable upon recurrences of injury effects. Assessment on such recurrences is said to turn on s 40(2)(b), with the 52 week retrospective assessment period running back from the later date of disability. In the present case, that meant 52 weeks back from 12 August 1994, not from accident date 16 March 1985. The Corporation's primary argument turned on the submitted significance on the word “first” in s 40(2)(a). The phrase “[i]n respect of each of the 4 weeks next following the sixth day after the day on which the incapacity first commenced (italics added) is said to mean the “first period of incapacity”, as distinguished from the “first commencement of any period of incapacity”. If the word “first” was intended to apply to any second or subsequent period of incapacity, it would be redundant. It would have been sufficient simply to say “commenced”. The Corporation sought support from the comparable phrase in s 38(2) (“beginning on the day on which the incapacity resulting from that work injury first commenced”). The District Court's decision was put as not recognising that the s 40(2)(a)) period of “the 4 weeks next following” means 4 weeks irrespective of whether there is incapacity during those 4 weeks, cp s 40(b) reference to “weekly period of incapacity”. The reference to “commencement of incapacity” in paragraph (b), it is said, refers to the period covered by (b), that being the most direct interpretation. On the District Court finding that s 40(2)(a) applies at the time of each recurrence, persons suffering non-work accidents or who have changed employment would have no compensation for the first week, a serious outcome for an earner with recurrent short-term incapacities. Conversely, an ongoing employer might find itself funding a recurrent series of first weeks. Asked for the logic behind a s 40(2)(b) 52 week approach on recurrences, counsel suggested s 40(2)(a) 4 week assessments for shorter term injury compensation, and s 40(2)(b) 52 week assessments for longer term injuries, which latter sensibly included recurring effects. 
Opening from the standpoint of the Claimant, the Amicus pointed to s 37 emphasis on incapacity as being “for the time being”, and s 40(1) reference to “immediately before commencement of the incapacity”. Section 40(2), it was said, should be construed accordingly as referring to current incapacity, with s 40(2)(a) directing reference to the preceding 4 weeks. Section 40(2)(a) reference to “the incapacity first commenced” does not mean “the first incapacity commenced”. The word “first” is not redundant on that interpretation, beyond an inherent redundancy seen in the notions of “first” and “commenced” in any event. Redundancy, in any event, is not decisive. Attorney-General v Davidson [1994] 3 NZLR 143, 148. The words “incapacity first commenced” came in as part of a 1993 amendment replacing the expression “first week of incapacity”. The statutory focus was on defining the “first week”, not extending further. 
From an independent standpoint, the Amicus acknowledged an ambiguity potentially accommodating both approaches, and requiring an overview of surrounding context and consequences. The Amicus acknowledged potential difficulty under a s 40(2)(a) 4 weeks approach, involving uncompensated first weeks upon recurrence in respect of non-work injuries, and recurrent first week liabilities for ongoing employers in event of recurrences arising from previous work injuries. That outcome would be avoided by a s 40(2)(b) approach. There would be financial winners and losers under both approaches, depending upon personal financial history The Amicus accepted the s 40(2)(a) approach could be inconsistent with long title requirements for an “equitable insurance based scheme”, and could lead to premium unpredictability. From an independent standpoint, the ultimate preference was for the Corporation approach. 
The question is one of Parliamentary intention. Section 40, and particularly 40(2), are to be read purposively. 
It is convenient to start with context, and wider statutory scheme. There is an obvious time-line envisaged. At outset s 38 provides for employees injured at work, a traditional priority group (cp former Workers Compensation legislation). Employees injured at work will have compensation for the first week of incapacity (basically at 80% of the previous seven day's earnings). Clearly, s 38 is seen as relating to the first week post accident. It is not intended to cover subsequent periods or recurrences, whether considered alone or in context of succeeding s 40. Then follow s 39 and 40 dealing with earners injured otherwise than at work, and earners injured at work in respect of periods after the first week. They will have compensation 
in respect of each of the 4 weeks next following the first week calculated at 80% of earnings during the 4 weeks prior to incapacity 
in respect of weeks of incapacity after that 4 weeks at 1/52 of earnings during the 52 weeks prior to incapacity 
There is a clear time-line of one week, 4 weeks, and thereafter, with historical bases for application of percentages shifting correspondingly. While there is no extrinsic guide to underlying policy, the concept that short-term incapacities should be compensated on the basis of short term immediately preceding financial histories, with longer term incapacity being based on longer term preceding financial history has credibility. It could often be the fairest and most accurate approach. It is probable that the intermediate situation of an original injury with effects of which recur from time to time would be seen as fitting more naturally within he latter category. Conceptually, it is one original accident, with effects which have periods of remission and re-emergence. It is not a series of new blows and fresh injuries. 
With that background in mind one turns to actual s 40 wording. Section 40(1) applies to earnings “immediately before the commencement of the incapacity” and “immediately preceding the commencement of incapacity”. While those phrases might seem neutral in themselves, succeeding s 40(2) clarifies. The initial one week period (end of the sixth day after the day of incapacity) is not covered at all. That is a clear allowance for s 38 first week post accident compensation where applicable. Section 40(2)(a) is designed to come in immediately after that first week post accident incapacity. While perhaps not too much reliance should be placed upon fine shades in wording in this rather difficult legislation, reference in s 40(2)(a) to the day on which the capacity “first commenced” is very consistent. It lays down a 4 week period to follow. It then covers subsequent incapacity on an open-ended basis. As drawn, s 40(2) does not envisage re-application as a whole including s 40(2)(a) each time an effect recurs, with a new one week/4 week/indefinite succession recommencing. Where there is a remission, and effects then recur outside the initial 5 week period, that re-emerging incapacity is to fall into the residual s 40(2)(b) category. 
That approach to probable Parliamentary intention is supported by consequences otherwise. If s 40 is construed so as to apply s 40(2)(a) to each re-emergence of effects, many long-term sufferers would lose a week's compensation on each re-emergence. It must be doubtful whether Parliament would have intended to penalise that particularly unfortunate and financially vulnerable group in that manner. Disincentives to malingering can be imposed in other ways. Sometimes, of course, a s 40(2)(b) approach could be disadvantageous for a claimant when compared with a s 40(2)(a) approach (even with loss of a first week's compensation), but that would not be common. The Accident Compensation scheme is not one entirely free from all anomalies, and some such are to be taken as tolerated. The Corporation's s 40(2)(b) approach does not involve any obligatory return to rates of remuneration extending back from date of accident (first incapacity), in this case 9 years ago. In fairness to the District Court, a misunderstanding to that effect may well have been highly influential—and understandably—in the interpretation which it reached, and which we are unable to share. 
In the result, the appeal must be allowed In the circumstances of this case, compensation is to be assessed on the basis of s 40(2)(b), the period being calculated back from the date of recurring incapacity 12 August 1994. 
There will be no order as to costs. 

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