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Accident Compensation Cases

Accident Rehabilitation and Compensation Insurance Corporation v Waitakere City Council (HC, 07/07/00)

Judgment Text

Salmon J
The appellant has appealed on a question of law against a decision of District Court Donovan on an appeal frorn a decision of a review officer. The appeal seeks to reverse that part of the District Court Judge's decision which held, that although the Corporation was entitled to seek recovery of premiums properly levied before the revocation of the Accident Compensation and Rehabilitation Corporation (Employment Premiums) Regulations 1994, the Corporation could not alter the premiums so levied because in order to do so the Corporation would need to rely upon Regulations since revoked. 
The respondent has filed a notice of intention to contend that the decision of the District Court should be varied. I shall refer to that as the cross appeal. The respondent contends that the conclusions of the District Court Judge upholding premium classification decisions reached by the Corporation, and by the review officer on review, is wrong; and that the premium classification should be changed in respects set out by the respondent. The appellant opposes that contention. 
At the relevant times the Accident Rehabilitation and Compensation Insurance Act 1992 was in force. That Act was repealed as from 1 July 1999 by the Accident Insurance Act 1998, but it was not suggested that the repeal has any effect on the issues for determination by the Court. I assume it is accepted that the transitional provisions of the 1998 Act preserve the rights of the parties in relation to the issues arising in these appeals in so far as those issues are governed by the provisions of the 1992 Act. The contest so far as the appeal is concerned relates not to the provisions of the 1992 Act, but rather, to the provisions of Regulations made under that Act and the effect of the repeal of those Regulations. 
Section 101(1) of the 1992 Act provides in part: 
“There shall be payable by every employer in accordance with this Act and Regulations made under this Act a basic premium at such rate or rates as are prescribed …  ”
Section 103(1) provides for employers to: 
“ … be classified into industry classes defined in Regulations made under this Act for the purposes of setting premiums payable under sections 101 and 102 of this Act. ”
Premiums payable by earners and employers under the Act are payable to the Commissioner of Inland Revenue as agent for the Corporation (s 117(1)). Apparently the procedure for this is that the employer files a return of wages paid to its employees with the Inland Revenue Department and includes in that return its assessment of the industry classification unit or activity in which the employer is engaged. Section 131 is important. It provides: 
Power to assess premiums - 
The Corporation may assess the amount of premium which ought to be paid or to have been paid in any case where 
The proper statement has not been made; or 
The Corporation is not satisfied with any statement; or 
The Corporation is not satisfied that the proper premium has been paid. 
Subject to subsection (3) of this section, the Corporation may at any, time alter or add-to the assessment made under subsection (1) of this section as necessary to ensure its correctness. 
Where a staternent has been delivered in respect of any period and a premium has been paid in respect of that period, the Corporation shall have no power 
Where an assessment has not been made, to make an assessment; or 
Where an assessment has been made, to alter the assessment so as to increase the amount payable 
after the expiration of 4 years from the end of the year (as defined in section OBI of the Income Tax Act 1994) in which the statement was made unless that statement was, in the opinion of the Corporation, fraudulent or wilfully misleading. 
The Corporation shall give written notice of the assessment or alteration of the assessment under this section to the person or persons to whom it applies and that person or persons shall be liable to pay the assessed or altered premium, and any specified penalty on the date specified in the notice of assessment. ”
The industrial activity and the rate of premium applicable to that activity was specified from year to year in Regulations. The pattern was that the Regulations were promulgated in December of the year prior to which they were to come into force. In each case the Regulations came into force on 1 April in the year following their making. 
The following year's Regulations revoked those for the previous year, but in each case contained a saving provision which provided that the previous year's Regulations would continue to apply for the yearly period concluding the day prior to the new, Regulations coming into force. Thus each set of Regulations applied for a period commencing on l April one year and expiring on 31 March the following year. 
The next year's Regulations revoked those containing the saving provision and the respondent's argument (upheld in the District Court) was that as a result of the repeal of the savings provision the ability to revise the premiums for that particular year was at an end. The effect of the defendant's argument is that any revision of the classifications would have to occur before 1 April of the year when the new Regulations came into force revoking the Regulations which contained the relevant saving provision. 
It will be seen from what is set out above that the initial premium classification is made by the insured. The appellant has the right to amend that classification: (s 103). That happened in this case with the appellant disagreeing with the classification adopted by the respondent. The appellant's reclassification resulted in revised premiums. Throughout these proceedings the respondent has challenged the appellant's authority to retrospectively reassess the premium classifications on the rounds that the relevant Regulations had been repealed. There has also been a Continuing dispute as to the appropriateness of the reclassification adopted by the appellant. 
The review officer held that the appellant's description of the Council's activities were accurate and that it had the right to reassess the premiums. The District Court Judge upheld the appellant's decision as to the appropriate classifications to be applied, but concluded that the revocation of the Regulations prevented the Corporation from reassessing the levies or premiums for the 1994/95 year and upheld the appeal in that respect. In doing so, Judge Donovan noted that s 20(e)(iii) of the Acts Interpretation Act 1924 preserved rights acquired under legislation subsequently repealed, but held that that did not apply to the correction of an assessment previously made because that required the Corporation to have regard to the provisions of repealed Regulations. He said: 
“The basis for any assessment seems to have gone and although the relevant provision of the Acts Interpretation Act permits the Corporation to seek recovery (if such were necessary) of premiums properly levied before the revocation of the Regulation it does not seem to me that the Acts Interpretation Act permits alteration of the premiums already levied for which purpose the Corporation would need to rely upon the since revoked Regulations. ”
For the purpose of the present case the chronology is as follows. 
December 1994 
Employment Premiums Regulations 1994 promulgated 
1 April 1995 
The 1994 Regulations cone into force. 
December 1995 
The 1995, Regulations are promulgated. 
1 April 1996 
The 1995 Regulations come into force. Those Regulations provide for the revocation of the 1994 Regulations, but contain a saving provision to the effect that the 1994 Regulations shall continue to apply for the period 1 April 1995 to 31 March 1996 
1 April 1997 
Employment Premiums Regulations 1996 came into force containing a provision revoking, the 1995 Regulations. 
The Appeal 
Since the District Court decision the Interpretation Act 1999 has come into force repealing the Acts Interpretation Act 1924. For the purposes of these proceedings it is my view that there is no relevant distinction between the provisions of the two Acts. 
The appellant relies on s 17(1)(b) and s 18 of the Interpretation Act 1999. Section 17(1)(b) provides: 
The repeal of an enactment does not affect 
An existing right, interest, title, immunity, or duty: ”
Section 18 provides: 
The repeat of an enactment does not affect the completion of a matter or thin; or the bringing or completion of proceedings that relate to an existing right, interest, title, immunity, or duty. 
A repealed enactment continues to have effect as if it had not been repealed for the purpose of completing the matter or thing or bringing, or completing; the proceedings that relate to the existing right, interest, title, immunity, or duty. ”
“Enactment” is defined to include Regulations. 
The appellant argued that it had acquired an existing right, or a right accrued as it was described under the previous legislation, and that the right was the right to determine that the employer's classification in its return was wrong and to remedy it. The appellant argued that all that remained to be done was the quantification of that right. 
For the respondent, Mr Land argued that this was not a case of seeking to enforce an unpaid levy which had been assessed or reassessed while the 1994 Regulations were in force. In this case the Corporation sought to reassess a levy already charged and paid and sought to make that reassessment after the Regulations had been revoked. He submitted that the relevant provisions of the Interpretation Act did not apply in such circumstances. 
In both cases the submissions proceeded on the basis that it was the Regulations that gave the right to amend the assessment. In my view that is clearly not so. It is s 131 that gives that right, a right which subs (3) provides (in the circumstances of this case) will continue for a period of four years. What the Regulations provide for is the means of quantifying that right. The question, therefore, is whether the Regulations are saved for the purpose of that quantification. The right itself continued to exist at the relevant time. It was not affected by repeal. In my view the repeal of the Regulations is prevented from affecting that right by ss 17 and 18 of the Interpretation Act. The repeal of the Regulations cannot affect the completion of the exercise of the appellant's rights under s 131. 
The respondent relied on the decision of the Privy Council in Abbott v Minister of Lands [1985] AC 425 where it was said at page 431: 
“They [Their Lordships] think that the mere right (assuming it to be properly so called) existing in the members of the community or class of them to take advantage of an enactment, without any act done by an individual towards availing himself of that right, cannot properly be deemed a ‘right accrued’ within the meaning of the enactment. ”
It should be noted that there is another line of authority which, in my view is more applicable in a case such as this which includes Face Lanka Insurance Company LO v Ranasinghe [1964] 1 All ER 457, Chaplin v Holden and NIMU Insurance [1971] NZLR 374 and most recently, Pleewa v Chief Adjudication Officer [1995] 1 AC 249. In the last of these cases the House of Lords considered the comparable provisions of the English Interpretation Act. They followed tile Free Lanka decision and said this at page 259: 
“In that case the Privy Council had no difficulty in construing the Ceylon Interpretation Ordnance 1900 as including, an inchoate or contingent right and the same approach should be adopted to the interpretation of ‘right’ ‘obligation’ or ‘liability’ in s 16 of the Act of 1978. The section clearly contemplates that there will be situations where an investigation, legal proceeding or remedy may have to be instituted before the right or liability can be enforced and this supports this approach. ”
However, as I have indicated above the right in this case is one which does not rely upon a provision of the Acts Interpretation Act for its continued existence but is one which at the relevant times continued to exist under s 131. 
In fact the Regulations do not themselves confer any right at all. They just provide the method of assessment of premiums, the right to which is provided for by the Act. The Regulations enable the quantification of that right. In this respect the appeal is allowed. 
The Cross Appeal 
The respondent originally classified all its relevant employees under the classification unit 81130 (Local Government Administration). The appellant classified the employees into separate units which ultimately resulted in their revised premiums. The respondent's position has changed somewhat from its original classification. It now maintains that the appropriate classifications are Local Government, Waste Disposal, Sewerage and Drainage, and Water Supply. The appellant on the other hand, takes the view that the appropriate classifications are Road and Bridge Construction, Waste Disposal, Water Supply and Sewerage and Drainage, but whilst some of the classifications coincide the employees to which they are to be applied, do not. In every case the appellant maintains that the classification should be one carrying; a higher premium than that for which the respondent contends. 
The review officer had before him the evidence of the chief management accountant employed by the appellant, Alexander Raymond Third. The District Court Judge also had available additional evidence in an affidavit of Ban Najim Aldin, an employee of the appellant. The Judge concluded from that evidence that from time to time some minor aspects of roading and construction were undertaken by Council employees. He referred to the evidence upon which he relied in support of that conclusion. 
As the Judge said, the issue is essentially one of fact, although the Judge accepted as correct in law the submission of counsel for the appellant that: 
“Functions which are ancillary or subservient to the activity of an employer fall within the classification unit for that activity and do not form a separate activity …  ”
The Judge also made a finding of law in relation to the use of what is called ANZSIC, the Australian and New Zealand Standard Industrial Classification Test. Counsel disputed the relevance of that test as a tool of interpretation of the meaning of the classification unit. The Judge said: 
“My own view is that the existence of ANZSIC and its application in the marketplace is a matter of which the Court is entitled to be cognisant and, where appropriate, take into account in assisting it in determining the commercial realities of a particular employer's situation. Reference to ANZSIC will not be appropriate where the meaning of the Regulation is clear in any event or where there is a conflict between the two. In the present case it seems to me that it is possible to resolve the issues raised in this part of the appeal without any such reference. ”
I agree with that discussion as to the relevance of ANZSIC. 
The Judge's decision is contained in the following passage 
“I am clearly of the view based upon the evidence in this case that the decision of the Corporation as to the appropriate classifications to be applied in each of the areas of dispute was the correct one. Although I have sympathy with the submissions made by the Council the clear fact in my view is that the activities in question are ancillary to other activities in respect of which the Corporation's classification is justified. ”
The respondent submitted that there was no evidence to support the finding (in effect) that the Council carried on the activity of “road and bridge construction”. The respondent also submitted that it is wrong as a matter of law to classify employees within a premium classification unit just because the employer has responsibility for certain functions of activities within that class. He submitted that it is necessary that the employer actually has a division or divisions that predominantly or substantially carry on .vork within that class. 
The 1994, 1995 and 1996 Regulations are relevant to the issue raised in the cross appeal. The relevant provisions of the 1994 Regulations are as follows 
The definition of ‘classification unit’ in Regulation 2(1). 
Classification unit means the industry, trade, business, profession or undertaking of an employer … as determined by the nature of the goods or services produced or rendered by that employer … or if no goods or services are produced or rendered, as determined by the nature of the employment. 
Regulation 4(2): 
Where an employer is engaged in two or more classification units and does not maintain records as. specified in paragraphs (a) and (b) of subclause 1 of this Regulation all employers shall be classified in the classification unit for which the highest rate of premium is prescribed by these Regulations. 
Regulation 6: 
Where an employee does not actually undertake work normally performed by employees engaged in the employer's classification unit, or any division of that classificaton unit, but the employee's work contributes to or services that classification unit or division then, for the purposes of calculation and payment of premiums, that employee shall be classified in that description or division of the employer's classification unit …  ”
The relevant provisions of the 1995 and 1996 Regulations include: 
The definition of activity contained in Regulation 2(1): 
‘Activity’ means the industry, trade, business, profession or undertaking of an employer … and for that purpose functions which are ancillary or subservient to an activity (including, but without by way of limitation, administration, marketing and distribution, technical support, maintenance, product development, or other like functions) shall comprise part of that activity and shall not form a separate activity. 
Regulation 6(1) which provides: 
Subject to the express provisions of this regulation, the purpose of this regulation is to -  
Recognise that premium rates for each classification unit have been risk weighted on the basis that functions which are ancillary or subservient to the activity comprising that classification unit do not form a separate activity and are treated as part of that activity, and therefore fall within that classification unit; and 
Consequently limit the circumstances in which an employer may have more than one classification unit to those where the employer is engaged in 2 or more distinct and independent activities and maintains appropriate records in relation to the same; and 
Provide for the classification of employees in those circumstances. 
Clause 6(3) which provides: 
Where an employer is engaged in 2 or more distinct and independent activities and does not maintain records as specified in paragraphs (a) and (b) of subclause (2) of this regulation, all employees shall be classified in the classification unit for the activity for which the highest rate of premium is prescribed by these regulations. 
Regulation 7(1) which provides: 
Where an employee does not actually undertake work normally performed by employees engaged in the employer's activity, but the employee's work contributes to or services that activity then, for the purposes of calculation and payment of premiums, that employee shall be classified in that employer's classification unit. ”
The parties are apparently agreed that despite the difference in wording between the 1994 Regulations and the subsequent ones, (in particular the definitions) their effect is the same. 
Counsel for the appellant laid particular emphasis on that provision in the Regulations which provides that where there is more than one activity tile activity with the higher premium rate applies. Counsel submitted that no matter how minor an activity, that provision would apply. 
Regard must be had, however, to the definition of activity and the recognition in that definition that there are functions subservient to it, which do not form a separate activity. The enquiry in each case must be as to what is the undertaking of the employer. The employer may have more than one undertaking in which case he will have more than one activity and unless separate accounting records are kept the activity with the higher premium rate would apply. 
For at least a portion of the relevant periods the Council had two business units - the Council itself and Waitakere Maintenance. I am not sure as to the extent to ,vhich separate accounting records were kept, but it seems from a document presented to the Court setting out the different views as to activity classification of the appellant on the one hand and the respondent on the other, that there must have been some separation of accounting records enabling the identification of more than one undertaking. 
The appeal to this Court can only be on a point of law (s 97, Accident Rehabilitation and compensation Insurance Act 1992). It is not permissible for this Court, therefore, to take a different view on the facts to that taken by the Court below. It is, however, a question of law whether there is any evidence to support a positive factual finding. As the Court said in Auckland lily Council v Wotherspoon [1991] NZLR 76
“It is important to distinguish between the situation in which there had been no evidence to support the original Court's findings and the situation in which there is merely argument over the sufficiency of the evidence which was in fact adduced. ”
The District Court decision contains little in the way of reasons or discussion as to the basis on which the conclusion was reached that the Corporation's decision as to the appropriate classifications was correct. The submissions made in this Court have satisfied me that there is sufficient doubt as to whether those classifications are correct to justify remitting the matter to the District Court for further consideration. I will endeavour in the balance of this judgment to set out the reasons why I have come to this conclusion and the approach that should be taken in the District Court to the question of classification. 
The first matter of concern is that the Judge's finding that the activities in question are ancillary to other activities seems to be inconsistent with the evidence he has set out earlier in the judgment and indeed, his statement as to the general theme of Mr Third's affidavit: 
“that the units in question are responsible for providing management services for the works falling within its area of responsibility. The actual work is done by others either independent contractors or stand alone units within the Council itself. ”
The Judge does not refer to any other evidence which would contradict that statement. 
Coming to the activities of the Council, it seems that the District Court has classified as road and bridge construction the activities of staff engaged solely in project management or in a regulatory role. If I have correctly appreciated the situation this cannot be right. Road and bridge construction must involve some construction activity. Mr Land, for the respondent Council, compared the project management activity with that of a consulting engineer and that seems to me to be a fair comparison. Another example is those sections of the Council or Waitakere Maintenance involved with water supply or sewerage or drainage. They are required from time to time to make good areas of roading or footpath where drains have been dug. I would have thought that even if that activity could be described as road and bridge construction it is not a separate activity, but is rather ancillary or subservient to the activity of water supply or sewerage and drainage. In each case it seems to me that a common sense approach must be taken determining first the activities of the Council and then whether work associated with that activity can be fairly described as ancillary or subservient to it, or itself a separate activity. 
In reaching these conclusions the Court must of necessity rely on the affidavits of Mr Third and Mr Aldin because that is the only evidence before the Court. It would be wrong for this Court to try to make findings of fact based upon those affidavits because this Court is concerned only with questions of law. I accept the distinction made by Mr Land between “activities” and “responsibilities”. The question is as to the employer's activities. As Mr Land says, a Council may have responsibility for road construction ,vithin its area under the Local Government LegislationIndeed, all Councils do have responsibilities of this nature, but if it is not actually carrying out the work of road construction, but just ensuring that independent contractors do so then it cannot be said to be engaged in the activity of road construction. 
Such an approach is consistent with statements made in appeals to the District Court such as that of Judge Middleton in Connetics lid v ARCIC, D.23/99, where that Judge said at page 5: 
“The purposes behind the notion of classification is that the premiums charged are based on the dangers involved in the various activities so that the higher the risk of danger the higher the premium to be paid. ”
For the sake of completeness I note that Mr Land conceded properly, that administrative staff servicing a physical activity of the employer will carry the premium rate appropriate to the physical activity. That is a proper application of Regulation 6 of the 1994 Regulations and Regulation 7 of the 1995 and 1996 Regulations. 
I wish to make it clear that nothing I have said in this judgment is intended in any way to predetermine the ultimate conclusion of the District Court as to the appropriate classifications. 
The appellant's appeal is allowed and so too is the cross appeal. In the case of the cross appeal the matter is remitted to the District Court for reconsideration in the light of the observations contained in this judgment. 
Each party having been successful there will be no order as to costs. 

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