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Accident Compensation Cases

Worrall v Chief Executive of the Department of Work and Income (HC, 22/05/01)

Judgment Text

JUDGMENT OF DOOGUE J 
Doogue J
Introduction 
[1]
This is a proceeding in which Mr and Mrs Worrall seek to have a decision of the Social Security Appeal Authority (“the Appeal Authority”) reviewed. The review sought relates to the application of s 86(9A) Social Security Act 1964 (“the Act”) in respect of monies which the first defendant (“WINZ”) says are owing by the plaintiffs. The Appeal Authority determined that there was no evidence in this case that the Department had acted in error in respect of any over-payment and that in the absence of such an error there was no basis for it applying the provisions of s 86(9A) of the Act to the facts of the particular case. 
[2]
What occurred in this case was that the WINZ paid to the plaintiffs unemployment, sickness and supplementary benefits under the Act between July 1992 and October 1994. As a result of the outcome of a review officer's decision, the second defendant (“the ACC”) was required to pay Mr Worrall weekly payments of compensation under the Accident Rehabilitation and Compensation Insurance Act 1992 (repealed) (“the ARCI Act”), backdated for the same period as the benefits were paid under the Act. Those back payments of weekly compensation by the ACC retrospectively removed the entitlement of Mr and Mrs Worrall to the benefits under the Act for the period in question. WINZ claims that it has established over-payment debts by Mrs Worrall of $18,362.54 and by Mr Worrall of $6,186.94 which it is entitled to recover. 
[3]
Mr and Mrs Worrall claim that s 86(9A) of the Act applies to them and that WINZ should write off their debts under that provision. WINZ's answer to that claim is that, where, as in this case, there is said to be retrospective loss of entitlement to a benefit, s 86(9A) of the Act cannot apply and that there is no proper basis for provisionally writing off a debt. 
Background 
[4]
In 1975 Mr Worrall at the age of 11 suffered injury as a result of a motor cycle accident. From August 1987 until June 1992 he received earnings-related compensation from the ACC. When the ACC ceased paying earnings-related compensation to Mr Worrall, WINZ paid Mr and Mrs Worrall an unemployment benefit at the married rate from 3 July 1992. Mr Worrall applied for a review of the ACC's decision to cease payment of his earnings-related compensation in July 1994. The ACC's review decision determined that Mr Worrall was entitled to reinstatement of his weekly earnings-related compensation from the date of its cancellation on 29 June 1992. When that decision was notified to the Worralls, Mrs Worrall immediately advised WINZ of that. There was then communication between WINZ and the ACC. 
[5]
On 13 October 1994 WINZ advised the ACC that the net sum of the overpayment to Mr Worrall was $25,057.84. In accordance with its understanding of the position, the ACC advised WINZ that only half of that sum would be refunded, the half it related to Mr Worrall, and not the half which it believed related to Mrs Worrall. In terms of the ARCI Act, the ACC had no power to make payments to persons other than claimants or in respect of the benefits, as occurs in this case, of the claimant. 
[6]
On 17 October 1994 the ACC authorised the payment to WINZ and the payment of the balance of monies due to Mr Worrall, and that payment was made on or about 19 October 1994. However, on 18 October 1994 WINZ sent a letter to the solicitor for Mr and Mrs Worrall stating that the over-payment was not as advised to the ACC but the sum of $42,641.25. That advice was not learned by the Worralls until about 6 November 1994. By that time, according to the affidavit of Mrs Worrall, the sum received by the Worralls from the ACC had been used by the Worralls to pay legal bills, to buy a low maintenance motor vehicle, and some new clothes. The Worralls thought that the monies received by them had been after the ACC had paid to WINZ everything that was required to be repaid to WINZ. 
[7]
Subsequent to these critical letters there was considerable correspondence. The correspondence from WINZ at various times advised the Worralls that the sums owing by them were different from those first advised to the ACC and then advised to the then solicitor for the Worralls. There was a clear chapter of bureaucratic errors. Ultimately the Worralls appealed to the Social Security Appeal Authority, which dismissed the appeal on 3 April 1996 but required WINZ to provide the Worralls with additional information as to what was owing by them and how it was calculated. It was not until June 1998 that WINZ actually provided that type of information. In December 1998 WINZ wrote to the Worralls as if much of the earlier correspondence had not occurred. They advised what they then regarded as owing by the Worralls. These proceedings were commenced on 20 September 1999. 
Factual Disputes 
[8]
There are various factual disputes. There is a dispute about the knowledge of the Worralls as to what funds might be repayable to WINZ after the ACC had made payments to WINZ. There is a dispute as to whether or not the Worralls expended the monies received by them from the ACC before they became aware of WINZ's claim upon them for over-payment. There are other lesser disputes which I need not refer to. 
[9]
In respect of the first of the disputes identified, it was claimed for WINZ that the Worralls had to be aware that there would be monies owing by them to WINZ after the payment by the ACC. That is said because Mrs Worrall acknowledged at an earlier stage that she expected the accident compensation payments to be roughly equivalent to the repayments of social welfare benefits. However, it is clear that, whatever her then understanding at the time she advised WINZ of the success of the accident compensation claim, subsequently the Worralls believed that the issues were being determined between the two defendants and that the sum that they received from the ACC was theirs. 
[10]
I cannot accept the submissions for WINZ that it was incumbent upon the Worralls to act in a cautious and prudent manner and not to use the monies received from the ACC until they had made further enquiry of WINZ. My assessment of this issue is quite the opposite. It is clear from the evidence that this is a case where the Worralls have never sought anything more than they were entitled to. It became an issue of who they were entitled to it from. It could be said that it was for the benefit of WINZ that they succeeded in pursuing the ACC. It could be said that if WINZ was likely to have had a claim for more than it was recovering from the ACC it should have advised the Worralls of that likelihood and put them on notice about it. WINZ did not do that. It had to be a reasonable expectation on the part of the Worralls that the money that they received from the ACC was theirs. Equally, it had to be a reasonable expectation on their part that they could expend it how they wished. As an officer of the ACC at one stage in this sorry affair acknowledged, the Worralls were the victims in this matter and they were caught between the policies and procedures of the defendants. 
[11]
There are numerous other facts that I have not referred to. It is fair to say, without disclosing sad details of their personal lives, that the Worralls are people deserving of benefits and welfare. Their lives have been difficult and the consequences of the present dispute, extending as it has done over such a substantial period of time, have clearly contributed to their problems. They are innocents in this affair. 
The Primary Legal Issue 
[12]
The primary legal issue is whether s 86(9A) of the Act can apply to the circumstances of this case. It authorises WINZ to provisionally write off a debt  
“which arose as a result of an error, made by an officer or employee of the Department, not intentionally contributed to by the debtor if the chief executive is satisfied that the person receiving the amount so paid in error did so in good faith and has so altered his position in reliance on the validity of the payment that it would be inequitable in all the circumstances, including his financial circumstances, to require repayment. ”
[13]
The Appeal Authority appears to have taken the view that the section could not apply where the entitlement to a benefit is lost not because of any fault on the part of anyone within WINZ but because of the retrospective loss of benefit resulting from Mr Worrall becoming entitled to accident compensation. The Authority did not address whether the debt arose as a result of any error on the part of any departmental officer or employee, or at least there is nothing that I can see within their decision which addresses that issue. The Authority's decision concentrates upon the cause of the over-payment which is sought to be recovered from the Worralls. It concentrates on the creation of the debt rather than on how the Worralls' indebtedness to WINZ arises. It does not deal with the possibility of any error by an officer or an employee of WINZ. The decision acknowledges that there was error on the part of WINZ, but that relates solely to the provision of information and not in relation to the debt of the Worralls. 
[14]
In respect of the situation that had arisen in thus case the Authority said: 
“1.
This extremely unfortunate set of circumstances has arisen because of the refusal of the Accident Rehabilitation and Compensation Insurance Corporation to understand that a married rate benefit which is paid to each spouse of a married couple is one benefit - it arises from one entitlement to a benefit, in this case the entitlement of the appellant husband who had a dependent wife and child. Each spouse receives half the total entitlement because of the provisions of s 83 Social Security Act 1964 which directs a benefit entitlement to be apportioned between spouses. This means that when a beneficiary who has entitlement to a benefit and who has a dependent spouse later qualifies for retrospective entitlement to earnings related compensation (or any other compensation, for that matter) the amount which must be refunded to the Department of Social Welfare for benefits paid during the period when compensation was payable is the whole rate of benefit paid to both spouses, and not simply that portion which was paid to the ACC claimant. 
2.
This is the fourth appeal which we have dealt with since 1992 on the same issue. In each decision we directed that a copy of our decision be forwarded to the Corporation so that their policy on this could be changed and those in the position of the appellants could be spared the stress and anxiety that goes with the process which the Department must undertake to recover balances owing. ”
[15]
It is submitted for WINZ that in circumstances such as the present there can be no prospect of s 86(9A) of the Act applying. Reference is made to the decisions of this Court in Southern District Review Committee v Baird [1993] NZAR 280 and Moody v The Chief Executive of the Department of Work and Income (unreported, AP 38/00, High Court, Christchurch Registry, 12 March 2001, Young J) that there is no error in circumstances such as the present. It is unnecessary to traverse those cases. It is simplest to cite a short passage from the decision in Moody
“[31] Also unclear is what the word ‘error’ encompasses. There has been a tendency in some of the cases to construe s 86(9A) on the basis that it applies only where there has been some sort of error on the part of the Department involving negligence or fault, in other words ‘culpable error’. I think that this view either developed or perhaps simply became entrenched as a result of a misinterpretation of the judgment of Tipping J in Southern District Review Committee v Baird [1993] NZAR 280. That was a case concerning a retrospective loss of benefit (very much in the circumstances to which I have referred in paragraph 20 above). In that case there was no error on the part of any departmental officer. When the money in question was paid out, the beneficiary was, in fact, entitled to be paid (as the absence from New Zealand had not exceeded thirty weeks). It was the fact that the absence exceeded thirty weeks which led to the retrospective loss of entitlement. The only relevant error was that of the beneficiary who asserted a lack of awareness of the thirty-week rule. Tipping J concluded that on his view of s 86(9A) there had to be an error on the part of a departmental officer before the section could apply. That view has subsequently, in effect, been adopted by Parliament which has amended s 86(9A) to make explicit the requirement that the error be on the part of a departmental officer. ”
[16]
Both Baird and Moody are cases far removed from the present and have no application to the present. What is submitted for WINZ is that the plaintiffs' debt arose not by any WINZ error but as a result of Mr Worrall's entitlement to backdated weekly compensation determined by the ACC in its review on 29 July 1994. The Worralls, it is submitted, then retrospectively lost their entitlements to the amounts they were paid under the Act. 
[17]
If s 86(9A) of the Act used the word “created” instead of the words “arose as a result of an error”, there could well be substance in the submissions for WINZ. However, what WINZ is now claiming from the Worralls is a sum of money arising, as has been submitted, out of the decision of the ACC to award Mr Worrall earnings-related compensation. The Worralls put in place, as far as they were able, arrangements for WINZ to recover from the ACC whatever was required to meet any sum that the Worralls might have to pay to WINZ. It is clear that WINZ immediately made two errors. First, as is acknowledged for WINZ, it advised the ACC of the incorrect sum owing by the Worralls to WINZ as a result of the decision of the ACC. That error related to the actual sum advised of $25,057.84 as the money it was owing. As is also recognised on the part of WINZ, in so advising the ACC of the sum owing, WINZ overlooked that certain benefits other than unemployment benefits had been paid to the Worralls. It is clear therefore that in respect of the indebtedness of the Worralls as claimed by WINZ it has been contributed to by the errors of WINZ in its communications with the ACC. If those errors had not occurred, it is clear that a substantially larger sum would have been paid by the ACC to WINZ and the debt which is now claimed from the Worralls would not exist in its current form. 
[18]
Secondly, WINZ erred in its advice to the ACC that monies were owing by Mrs Worrall as well as Mr Worrall. If WINZ had followed the guidance of the Appeal Authority, as it was obligated to do in the absence of any other determination as to the correct position, it would have put the position in respect of the benefits payable to it before the ACC in a way which showed clearly not that there was benefit repayable to both Mr and Mrs Worrall but that all the benefit repayable arose through Mr Worrall. It is true, as is submitted for WINZ, that there have been subsequent legislative changes from which it can be argued that the Appeal Authority was wrong in its position and that there was no basis for WINZ to seek repayment from the ACC of anything other than related to Mr Worrall. That is as may be. The argument comes badly from WINZ at this time. It is clear that WINZ did not pursue with the ACC the point made by the Appeal Authority that the whole of the benefits received by the Worralls came through Mr Worrall and that it was possible for the ACC to treat them in that respect and repay more than the ACC did to WINZ. 
[19]
It is easy to say now that WINZ was justified in doing what it did. It is plain, however, that the present indebtedness claimed from the Worralls would not have arisen except as a result of the errors already identified on the part of employees of WINZ and in respect of a further error, namely that at no time did any employee of WINZ make plain to the Worralls that they should hold any sums received by them from the ACC until their final liability to WINZ was resolved. 
[20]
Thus, contrary to the submissions for WINZ, I accept that, in respect of the indebtedness which WINZ still claims from the Worralls, it does arise, in the broader sense of that word, as a result of errors on the part of employees of WINZ. The Worralls have therefore satisfied me that the Appeal Authority did err when it reached a different conclusion. 
[21]
There is no question in this case that the other provisions of s 86(9A) would have to be determined in favour of the Worralls. There has never been any suggestion that the Worralls received the amount paid to them other than in good faith. It is clear that they changed their position in reliance on the validity of the payments to them in the way that it would be inequitable in all the circumstances, including their financial circumstances, to require repayment. On any basis WINZ should have looked at a fair, large and liberal interpretation of the provision to enable it to assess persons such as the Worralls who endeavoured, to the best of their ability, to ensure that they received no more than they were entitled to. 
[22]
This is a case which does not reflect well upon WINZ. It is clear that WINZ is endeavouring to rely on refined legal argument to prevent it forgoing the relatively small amount which came into the hands of the Worralls not through any error on their part but through errors on the part of WINZ's employees, compounded to some extent by the Worralls not being the beneficiaries of a change in policy of the ACC which occurred a month after the payment. It is unnecessary to go into the latter matter in any detail. There were also amendments to the ARCI Act which may in turn have prevented the present problems. However, the primary issue is that the Worralls have had to fight long and hard for their rights in respect of payments to which they were entitled in relation to both the defendants. WINZ's correspondence almost beggars belief in its attitude towards the Worralls. At one stage it required them to pay more than $40,000 to WINZ within seven days. This after it had advised the ACC that the total sum owing by the Worralls was $25,057.84. 
[23]
The position is made worse when the personal situations of the Worralls are taken into account. They are known to WINZ. To protect the privacy of the Worralls, I prefer not to record them in this judgment. However, they point clearly to the assessment by the more sympathetic and forgiving officer of the ACC that the Worralls were the victims in this case caught between WINZ and the ACC. 
Decision 
[24]
There will be a declaration as sought by the Worralls that the first defendant should exercise her power to write off the debt owed by the Worralls to WINZ. 
Costs 
[25]
The plaintiffs are legally aided. They are entitled to costs. Those costs should only be against WINZ. The costs are fixed in accordance with Category 2 in the Third Schedule to the High Court Rules and Column B of the Fourth Schedule of the High Court Rules. They include any reasonable disbursements. In the event of them not being able to be agreed, they are to be fixed by the Registrar. 
Miscellaneous 
[26]
There has been little reference to the ACC in this case. It has been unnecessary. As matters transpired in the way in which the case was put to the Court, no relief was sought from the ACC. 
[27]
There is one further matter which needs to be recorded. There was an objection by Mr McHerron to certain material in an affidavit in reply by Mrs Worrall referring to paragraph 15 in an affidavit on behalf of WINZ by a Mr Smith. The material within Mrs Worrall's reply was not strictly reply material and was in any event irrelevant to the issues between the parties. As a result, it was not taken into account by me. 

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