ACCIDENT COMPENSATION CORPORATION V AFFCO HOLDINGS LIMITED HC WN CIV 2007-485-508

ACCIDENT COMPENSATION CORPORATION V AFFCO HOLDINGS LIMITED HC WN CIV 2007-485- 508 26 September 2008IN THE HIGH COURT OF NEW ZEALAND WELLINGTON REGISTRY CIV 2007-485-508BETWEEN ACCIDENT COMPENSATION CORPORATION Plaintiff AND AFFCO HOLDINGS LIMITED Defendant Hearing: 10 September 2008 Appearances: I.G. Hunt - Counsel for Plaintiff G.P. Malone - Counsel for Defendant Judgment: 26 September 2008 at 2.30 pmJUDGMENT OF ASSOCIATE JUDGE D.I. GENDALLThis judgment was delivered by Associate Judge Gendall on 26 September 2008 at 2.30 p.m. pursuant to r 540(4) of the High Court Rules 1985.Solicitors: Young Hunter, Barristers & Solicitors, PO Box 929, Christchurch Solutions Law Office, Lawyers, PO Box 3462, NelsonIntroduction[1] The plaintiff ("ACC") applies for orders staying a counter-claim dated 14 April 2008 filed by the defendant here and referring the same to arbitration, and striking out parts of the statement of defence. [2] The defendant ("Affco") opposes these applications.Background Facts and Legal Framework[3] Affco is a New Zealand registered company which holds interests in various companies involved in the meat industry. [4] ACC is a statutory body which operates under the Injury Prevention, Rehabilitation and Compensation Act 2001 ("the 2001 Act"). Under ss 181 to 189, it is empowered to enter into accreditation agreements with employers in accordance with a Framework established under or continued by s 183. These agreements provide for "Accredited Employers to provide at their own cost entitlements in relation to work-related personal injuries suffered by their employees during a claim management period" (s 182). The converse is that ACC will charge the employer reduced levies for work-related personal injuries reduced levies on the basis set out in the Framework (s 184(1)(b)). [5] A work-related personal injury is defined in s 28. This section provides (in part):"(1) A work-related personal injury is a personal injury that a person suffers— (a) while he or she is at any place for the purposes of his or her employment, including, for example, a place that itself moves or a place to or through which the claimant moves; or (b) while he or she is having a break from work for a meal or rest or refreshment at his or her place of employment; [6] "Place of employment" is defined in s 6 as meaning "any premises or place":"(a) occupied for the purposes of employment; or (b) to which a person has access because of his or her employment; or (c) attended by a person for a course of education of training."[7] Section 187 sets out the primary obligations of an Accredited Employer as follows:"187 Accredited employers to provide entitlements(1) An accredited employer must, during the claim management period concerned,— (a) manage every work-related personal injury claim relating to injury suffered by an employee of the employer in that employer's employment during the period specified for the purpose in the accreditation agreement; and (b) provide any entitlements, and pay the costs, specified in the accreditation agreement in relation to every such claim. (2) Despite subsection (1), the Corporation may agree with an accredited employer to assume some or all of the employer's liability under subsection (1) on such terms and conditions as the Corporation thinks fit. (3) If an accredited employer has ceased to exist or fails or is unable to perform its obligations under an accreditation agreement or this Act,— (a) those obligations must be performed by the Corporation; and (b) except to the extent otherwise provided in the accreditation agreement, the cost of doing so will constitute a debt due to the Corporation from the accredited employer; and (c) for the purposes of any law relating to the ranking of creditors on an insolvency, receivership, or liquidation, that debt is, to the extent it represents payment of weekly compensation to an employee, to be regarded as ranking in priority next after wages or salary. (4) The obligations of an accredited employer under, and other provisions of, an accreditation agreement in respect of any work-related personalinjury claim relating to injury suffered during the period specified for the purpose in the accreditation agreement continue after the termination of the agreement as if the agreement remained in force."[8] ACC and Affco entered into an Accredited Employer Programme Accreditation Agreement ("the Agreement") in July 2000. The Agreement was for cover periods commencing 1 July 2000 and, with amendments subsequently agreed, has continued in force at all material times. [9] Obligations of ACC are set out in clause 3 of the Agreement. Amongst other things, under clause 3.1.2 ACC must provide:(a) access to relevant sections of ACC's decision support system; (b) general information and assistance concerning programme administration;[10] Relevant obligations of Affco under the Agreement include the following:• Clause 4.1.1 – "perform the functions and duties and exercise the powers of ACC described in Schedule A and Schedule B."• Clause 4.1.4 – "promptly performs its obligations and make all payments it is required to make under this Agreement."• Clause 4.2.1 – "comply with the requirements of the [2001 Act], regulations made under the [2001 Act] and this Agreement."• Clause 4.2.7 – "inform the Claimant of his or her rights of review and appeal if dissatisfied with decisions (including deemed decisions) of the Accredited Employer"• Clause 4.2.9 – ensure that it has the appropriate processes and procedures in place to ensure that there are full records of all claims by employees who have suffered a work-related personal injury are recorded and of other specified steps.• Clause 4.2.12 – "observe the procedures set out in Schedule B when making decisions and where an affected party disputes a decision of the Accredited Employer on a claim."• Clause 4.2.15 – "if it receives a claim for which it is not responsible under this Agreement, forward the claim to the insurer who is responsible or in cases of doubt, to ACC."• Schedule A, clause A1.1 – to provide the service on behalf of ACC of"claim and case management, including to manage all work-related personal injuries suffered by the Accredited Employer's employees to the standard required by the [2001 Act] and this Agreement throughout the relevant Claim Management Period."• Schedule A, clause A1.2 – on behalf of ACC of "to provide any statutory entitlements, and to pay the administration and other costs in relation to every such claim, but subject to reimbursement under any liability cap that applies under Schedule F"• Schedule A, clause A1.3 – on behalf of ACC of "to perform all the obligations arising under [ss 48 to 66 of the 2001 Act] as a result of a work-related personal injury claimed to have been suffered by an employee of the Accredited Employer that would otherwise be obligations of ACC as insurer unless the Act or the context requires otherwise."• Schedule A, clause A2.1 – "Except as provided in this Agreement and subject to clause A2.2, the Accredited Employer must, on behalf of ACC, manage, and be liable for statutory entitlements, case management costs and other amounts as provided in this Agreement for all claims arising out of a work-related personal injury suffered by any Injured Employee during a Cover Period"• Schedule A, clause A2.2 – "Except as provided in this Agreement, the Accredited Employer must manage each claim during its Claim Management Period"• Schedule A, clause A2.3 – "Except as provided in this Agreement, the functions and duties to be performed on behalf of ACC are those set out in [Parts 3 and 4 of the 2001 Act], with the Accredited Employer fulfilling the functions and duties and exercising the powers of ACC."[11] Affco's liability to provide statutory entitlements in respect of any work- related personal injury suffered by one of its employees in any one cover period was (at the relevant time) capped at $1 million pursuant to Schedule E of the Agreement and clause 16 of the Framework. [12] Schedule A, clause 4 provides for ACC to assume management of a claim in certain circumstances, in which case Affco would remain liable to ACC for the specified costs:A4.1 ACC and the Accredited Employer may agree from time to time that ACC will assume the management of a claim on such reasonable terms and conditions, including fees, as are agreed. A4.2 The Accredited Employer agrees that ACC may assume sole management of any claim where: A4.22 a serious ongoing claim is involved and ACC considers that the claim is not being, or will not be, managed appropriately by the Accredited Employer. Except where the Injured Employees makes an election under [section 26(8) of the 2001 Act], the Accredited Employer remains liable for the cost of statutory entitlements, and other costs and expenses and has other obligations, as described in clause A4.6 A4.5 Where ACC assumes management of any claim, ACC must keep the Accredited Employer informed to the greatest extent practical, consistent with the interests of the employee and the reasons ACC assumed management of the claim. A4.6 Where ACC has assumed management of a claim under clause A4.2, the Accredited Employer is not liable to pay the Injured Employee thestatutory entitlements that it would otherwise be obliged to pay but must reimburse ACC for all statutory entitlements (except those specified in clauses A7.1 and A7.2) and costs and expenses incurred by ACC in relation to the claim (including proper allowance for case management expenses that would not have been incurred by ACC but for its decision to manage the claim) in respect of the Claim Management Period and must provide ACC with all information and any assistance and co-operation reasonably required by ACC. The Accredited employer may also have liabilities to ACC in respect of statutory entitlements and other amounts as specified in Schedule F.[13] Schedule F of the Agreement goes on to provide more detail as to the obligations and consequences of ACC assuming management of a particular claim [14] Under clause 1.1 of the Agreement, Affco is the agent of ACC for the purposes of providing statutory entitlements in relation to work-related personal injuries suffered by its employees in that employment (insofar as this agency relationship is contemplated by and necessary for the purposes of the 2001 Act). This agency exists until, inter alia, the assumption of management of an individual claim by ACC. [15] There are also duties of good faith between ACC and Affco in clauses 1.8 and 1.9. [16] Clause 20 of the Agreement provides for dispute resolution processes. The provisions of Schedule B apply where a claimant, health professional or insurer disputes a decision of the Accredited Employer (clause 20.1). Clauses 20.2 to 20.11 provide a procedure for other disputes ("the dispute resolution process"). Clause 20.2 provides as relevant:"Any dispute between the Accredited Employer and ACC as to: 20.2.1 the interpretation of this Agreement; or 20.2.2 the performance or exercise by either Party of any obligations or rights under this Agreement – must be referred by the Parties to a meeting to be convened of the authorised representatives of ACC and the Accredited Employer."[17] If, as a result of this meeting ACC and Affco are unable to reach agreement within five working days of the referral or any agreed longer period, the matter is to be referred to a meeting of the chief executives of the parties or their nominees (clause 20.3). Failing agreement again, the matter is to be referred to mediation under clause 20.4 and then to arbitration under clause 20.5. The decision of the arbitrator is final and binding: clause 20.6. [18] Pending the resolution of a dispute as to the amount to be paid by the Accredited Employer to ACC, clause 20.9 provides that "the amount claimed by ACC shall be paid to it notwithstanding the dispute". Clause 20.10 provides for interest to be paid by ACC where it is liable to repay any money paid by the Accredited Employer under clause 20.9.The facts giving rise to the claim at issue[19] On 8 April 2003, an employee of the Wairoa Meatworks ("the Meatworks"), Mr Joel Storey ("Mr Storey"), was shot while he was in a car in a car park situated on land belonging to the Meatworks. This occurred during a break in the evening shift at the Meatworks, which Mr Storey was working. [20] The Meatworks factory is owned and operated by Affco New Zealand Limited ("Affco New Zealand"), which is a subsidiary of Affco and is covered by the Agreement. [21] As a result of the incident, Mr Storey suffered injuries which have been found to entitle him to various payments under the Act and which have resulted in various other expenses being incurred. As I understand it, both parties accept that his injuries constitute a "serious ongoing claim" pursuant to clause A4.4 of the Agreement. [22] On 22 April 2003, either Affco or Affco New Zealand accepted a claim for cover submitted by Mr Storey as a claim for a work-related personal injury.[23] In October 2003, Mr Storey's claim was transferred to ACC ("the transfer"), which has from that time assumed sole management of the claim. There was a dispute between the parties as to who initiated this transfer. [24] ACC has subsequently rendered invoices to Affco for the costs it has incurred in the management of Mr Storey's claim since the transfer. As of 17 January 2008, these invoices totalled $606,980.10 and remained unpaid. As a result, on 7 March 2008 ACC commenced the present substantive proceeding seeking judgment for this sum plus interest in accordance with clause 11.5 of the Agreement. [25] On 6 May 2008 Affco filed a statement of defence and counterclaim. Relevant to the present application, Affco: (a) Denies that it bears any liability in relation to Mr Storey's claim (at para [16](b) and (c)). (b) Denies that it is obliged to reimburse ACC for, inter alia, all entitlements, costs and expenses incurred by ACC in relation to Mr Storey's claim together with other liabilities to ACC in respect of other entitlements and other amounts specified in Schedule F, ACC having assumed management of the claim (at para 16(c)). (c) States that "on 8 April 2003, during a break in the evening shift at the Meatworks, Joel Storey left the Meatworks, went to and sat in his car with Jade Tahuri drinking whisky and smoking marijuana" (at para 20(b)). (d) States (at para 28) that the Agreement only relates to work-related personal injuries, that Affco has no liability in relation to non-work- related injuries, that Mr Storey's injury was not work-related because it was not suffered: (i) while he was at any place for the purpose of his employment – instead he was in his car for the purpose of smoking cannabis and drinking alcohol;(ii) while he was having a break from work for a meal, rest or refreshment at his place of employment – he was in his car which contained drugs, drug paraphernalia and alcohol which he was using and, in these circumstances, his car cannot be described as his place of employment. And, smoking cannabis and drinking alcohol are not activities of eating a meal, resting or taking refreshment per the Act; (iii) while he was travelling to or from his place of employment – he was not travelling anywhere at the time he was shot; and (iv) while he was travelling for the purposes of getting treatment for a work-related personal injury. (e) Raises an affirmative defence (at paras 29 to 34) that ACC is in breach of clauses 1.8 (good faith), 3.1.2 (providing access to decision support system and programme administration assistance) and/or the implied term of the Agreement that ACC must allow Affco (or Affco New Zealand) to dispute whether an injury for which it may have liability under the Agreement was work-related through the decision support system and related dispute procedures under the Act. Essentially, Affco says that ACC acted in a way which first, prevented Affco (or Affco New Zealand) from issuing a decision under s 65 of the 2001 Act revising its earlier decision that Mr Storey's injury was work-related, secondly, deprived them of access to its decision support system, of assistance in relation to the administration of Mr Storey's claim and of the ability to dispute whether the injury was work-related through the dispute procedures under the Act, and thirdly, was in breach of ACC's obligations under the Agreement and the Act. [26] In its counterclaim, Affco seeks to recover from ACC monies which it says it paid in relation to Mr Storey's claim (before ACC assumed management of the claim), being approximately $103,000, plus interest. In its first cause of action Affco claims these monies on the basis that it paid them under the mistaken belief that Mr Storey's injury was work-related. It says that it was ACC's obligation to pay these amounts and therefore ACC was unjustly enriched by Affco making these payments.[27] In its second cause of action Affco relies on the same alleged breaches of the Agreement by ACC as it relies on for its affirmative defence (see [25](e) above) and submits that any liability Affco has to ACC as pleaded by ACC has arisen as a result of these breaches. It contends that, had Affco New Zealand not been precluded by ACC's actions from reserving or challenging the decision that Mr Storey's injury was work-related then it would have been entitled under the Agreement to recover these payments. [28] In response to Affco's statement of defence and counterclaim, ACC now brings the present application for orders:• Staying Affco's counterclaim and referring ACC and Affco to arbitration in respect of the counterclaim; and• Striking out the paragraphs of the statement of defence listed in para [25] above.Stay of Proceedings and Reference to ArbitrationCounterclaim[29] ACC submits that the counterclaim raises a dispute which is subject to the dispute resolution process in clauses 20.2 to 20.11 of the Agreement. [30] As noted above (at para [16]), the dispute resolution process applies where there is a dispute as to the interpretation of the Agreement or the parties' performance or exercise of any rights or obligations under the Agreement. ACC submits that the counterclaim raises such disputes and therefore "must" be dealt with by the dispute resolution process according to clause 20.2. [31] ACC submits that Affco's first cause of action – that monies were paid by Affco by mistake – puts at issue the performance or exercise of a party's obligations or rights under the Agreement. It contends that Affco does not deny that the dispute raised by Affco's counterclaim is covered by the dispute resolution process – and, indeed, that Affco's opposition to ACC's statement of claim – that "the Statement of claim amounts to a submission on the substance of the dispute thereby disentitling the plaintiff from seeking a stay of the proceeding and the reference of them toarbitration" (as discussed below) – can be read as an acknowledgement that the substance of the dispute is covered by clause 20.2. It also notes that the matters referred to in the counterclaim have already been the subject of a meeting and mediation pursuant to the initial steps in the dispute resolution process. Lastly, ACC argues that clause 20.8 (which provides that, pending resolution by arbitration of a dispute as to amounts owing to ACC, Affco is to pay to ACC the amount claimed by ACC) makes it clear that disputes over monies owing to ACC are matters that are expected to be resolved by the dispute resolution process. [32] In relation to Affco's second cause of action, ACC says that this pleads breaches of clauses 1.8 and 3.1.2 of the Agreement and thus clearly raises a dispute as to ACC's performance or the exercise of its obligations under the Agreement. [33] ACC also repeats this submission in relation to Affco's affirmative defence – that it raises matters of dispute that must be referred to arbitration. (ACC says that ACC and Affco have met and have mediated in an attempt to resolve this dispute but have been unable to reach agreement and so the matter should now be referred to arbitration under clause 20.5 of the Agreement.) For example, ACC contends that Affco's allegation that ACC had and breached an obligation to provide Affco with access to ACC's decision support system and assistance with programme administration clearly concerns ACC's obligations under the Agreement. In addition, ACC argues that the alleged implied term that ACC is obliged to allow Affco or Affco New Zealand to dispute whether a personal injury is work-related goes to both the interpretation of the Agreement and ACC's obligations. ACC further contends that the correspondence between the parties illustrates that these matters are in dispute. [34] On these aspects, I do not understand Affco to deny that its counterclaim and/or its affirmative defence raise matters that, in the normal course of events, are to be dealt with under the dispute resolution process in the Agreement. [35] However, Affco submits that by ACC filing its statement of claim, it has submitted its "first statement" on the substance of this dispute and is thereby precluded from subsequently seeking to stay the counterclaim and obtain ordersreferring it to arbitration. This is a reference to Article 8(1) of Schedule 1 of the Arbitration Act 1996, which provides:8 Arbitration agreement and substantive claim before court(1) A court before which proceedings are brought in a matter which is the subject of an arbitration agreement shall, if a party so requests not later than when submitting that party's first statement on the substance of the dispute, stay those proceedings and refer the parties to arbitration unless it finds that the agreement is null and void, inoperative, or incapable of being performed, or that there is not in fact any dispute between the parties with regard to the matters agreed to be referred.[36] As I understand it, neither party seeks to argue that the arbitration agreement is null and void, inoperative, or incapable of being performed or that there is not a dispute between the parties. The sole issue here is whether ACC made a first statement of the substance of the dispute by filing its statement of claim. [37] ACC submits that this issue usually arises when a party which has been served with proceedings takes a step in those proceedings amounting to a statement on the substance of the dispute – citing The Property People Ltd v Housing New Zealand Ltd [1999] 14 PRNZ 66 and Pathak v Tourism Transport Ltd [2002] 3 NZLR 681 as examples. In the former, submitting a response and defence in respect of an application for an interim injunction was a first statement. In the latter, steps including the seeking and provision of further particulars, the completion of discovery and inspection and attendance at hearings precluded the plaintiff then seeking a stay and referral to arbitration. [38] ACC argues that its statement of claim is not "the first statement on the substance of the dispute", that matters asserted by ACC in the statement of claim (which is a claim that Affco is in breach of an obligation in the Agreement to pay amounts invoiced by and due to ACC) do not amount to a statement on the substance of the dispute raised by either of the two causes of action pleaded in Affco's counterclaim. As such, ACC says that it has applied for a stay and referral to arbitration within time (ie. at the time of making its first statement on the substanceof the dispute) and so article 8 requires the Court to stay the counterclaim and refer the dispute to arbitration. [39] ACC submits that the Court refusing to make these orders would lead to "the unacceptable prospect of the process of this court being used to subvert the arbitration agreement" and the provisions of the Agreement and the 2001 Act, citingMontgomery Watson NZ Ltd v Milburn NZ Ltd & Ors HC CHCH CP86-00 9 October 2000. In that case, William Young J considered that it would be "permitting the process of this court to be used so as to subvert the arbitration agreement" if the Court did not also stay the proceeding against defendants who were not parties to the arbitration agreement where they "could perhaps be expected to" join the defendant who was a party to the arbitration agreement as a third party. [40] Conversely, Affco submits that ACC's statement of claim is a first statement on the substance of the dispute. Counsel defines "the substance of the dispute" as being whether Affco owes any money to ACC under the Agreement. Counsel says that resolving this issue entails determining first, whether Mr Storey's injury was work-related such that Affco has liability under the Agreement, secondly, the basis on which ACC assumed management of Mr Storey's claim and whether it breached the Agreement in doing so, and thirdly, if ACC did breach the Agreement, whether it is now precluded from seeking to recover monies from Affco (or is liable to Affco in the same sum) as a result of its breach. [41] Affco contends that ACC has been aware of both its own claim and Affco's counterclaim as early as 2005 and has refused to go to arbitration, instead electing to file these proceedings. Affco submits that the fact that ACC was aware of the arbitration provision but nevertheless chose to bring the dispute before this Court is a factor telling against allowing it now to seek a stay and referral, citing The Property People (at [23]). Affco contends that this is a situation where ACC's dealings with Affco and its filing of the statement of claim reflects a decision on ACC's part "to abandon the remedy of arbitration in favour of court proceedings" (adopting the words of Potter LJ in Downing v Al Tameer Establishment [2002] EWCA Civ 271 at [35], cited in Pathak at [33]).[42] Moreover, Affco responds to ACC's submissions (in relation to Affco's affirmative defence) on this issue, saying:such a submission seeks to have the plaintiff's claim determined by the Court without regard to any possible defence, and then have the defence determined by a different body. However if the defence is valid then the claim is invalid and it is not possible to determine one without the other. If there was force in the plaintiff's submission the Court would have to refer not only the issues put in defence but the claim itself to arbitration.[43] In relation to its counterclaim, Affco says that the first cause of action is the "flip side" of ACC's claim against Affco – if Mr Storey's injuries were work-related, Affco has a prima facie liability for payments made by ACC, but if the injuries were not work-related, ACC would seem to be liable to Affco for the payments it has made. Thus, Affco says that the claim and counterclaim are part of the same dispute and determination of the claim will largely resolve both. [44] A further submission from Affco is that the second cause of action in its counterclaim is, in effect, a positive claim relating to the affirmative defence – that if Affco has liability then it has arisen as a result of ACC's breaches of the Agreement and thus the liability should be met by ACC. Affco contends that, although it could be seen as a stand alone action, it is inextricably linked to the main dispute and affirmative defence and, it having been raised in the course of the parties' dealings, ACC's statement of claim is a statement on this dispute. Lastly, Affco submits that if this second counterclaim was to be treated as a separate matter to be dealt with by arbitration, there would be a possibility of two separate judgments on the same point – the arbitrator and Court might find differently on the affirmative defence and on the counterclaim. It is Affco's submission that this possibility shows that the counterclaim is part of the dispute raised by the statement of claim. [45] In my view, a statement of claim can constitute a first statement on the substance of a dispute – the first statement need not be made after the party has been served with the proceeding. An example is Hurihanganui v New Zealand Post LtdHC AK M653198 3 June 1998 where Master Kennedy-Grant found that "whether or not the plaintiff's original statement of claim filed at the same time as his applicationfor an interim injunction should be regarded as his first statement on the substance of the dispute, his amended statement of claim filed on 7 May 1998 clearly should be regarded as that statement." The amended statement had merely added a further paragraph clarifying the basis on which the plaintiff's claim was brought. [46] Subsequently, in Connor v Sensation Yachts Ltd HC AK CP454-IM99 22 June 2000, Master Faire decided that a statement of claim was not a first statement on the substance of the dispute which was to be referred to arbitration because the reference in the statement of claim to the matter in dispute was "background only" and the disputed facts were "not essential facts requiring to be proved for the purpose of obtaining judgment on the cause of action" (at [13]). (I note, however, that Master Faire went on to find that the defendant had put this matter at issue in its statement of defence and counterclaim and by the matters raised in its affidavits in opposition to summary judgment, and the plaintiff had then responded in an affidavit, which was found to be a statement for the purposes of article 8.) [47] Here, I am of the view that the statement of claim, affirmative defence and counterclaim are all part of the one dispute as to which of the parties is liable for the payments and costs in relation to Mr Storey's claim. ACC's claim asserts a position in relation to this principal issue which, if accepted, would go a long way to determining the affirmative defence and counterclaim. In my view it cannot be appropriate that ACC can bring a claim against Affco but then deny Affco's ability to defend it properly by invoking the arbitration agreement. ACC chose to file its present statement of claim instead of utilising the dispute resolution process and, in doing so, has made a first statement on the substance of the dispute. [48] In relation to a question by the Court as to why the counterclaim should be referred to arbitration but ACC's claim should not, counsel for ACC referred to clause 20.8 – that Affco is obliged to pay disputed amounts claimed by ACC pending resolution by arbitration. He therefore contended that Affco had an obligation to pay the monies claimed in its statement of claim irrespective of whether they were the subject of a dispute being arbitrated. [49] However, ACC's statement of claim in this proceeding does not seek specific performance of Affco's obligation under clause 20.8 nor does it seek to recover themonies claimed on the basis of this clause – ie. pending resolution of the dispute. Instead, it claims that it is conclusively entitled to these monies. If a judgment was given on this statement of claim in ACC's favour, this would seem to preclude any subsequent re-opening of the matter via arbitration in determining the counterclaim. This reinforces my view that the claim and counterclaim are part of the same overall dispute and that it would be inappropriate to stay the counterclaim but allow the claim to proceed – and that the statement of claim is a first statement on the substance of the dispute. [50] As such, I find that ACC's application for a stay and referral to arbitration was made later than when it submitted its first statement on the substance of the dispute and is therefore out of time under article 8.Strike Out[51] The Court's power to strike out a proceeding or part of a proceeding is set out in r 186 of the High Court Rules, which provides:"186 Striking out pleadingWithout prejudice to the inherent jurisdiction of the Court in that regard, where a pleading— (a) Discloses no reasonable cause of action or defence or other case appropriate to the nature of the pleading; or (b) Is likely to cause prejudice, embarrassment, or delay in the proceeding; or (c) Is otherwise an abuse of the process of the Court,— the Court may at any stage of the proceeding, on such terms as it thinks fit, order that the whole or any part of the pleading be struck out."[52] Strike out applications are to proceed on the assumption that the facts pleaded in the statement at issue (here, the statement of defence) are true, unless the pleaded allegations are entirely speculative and without foundation: Attorney-General v Prince and Gardner [1998] 1 NZLR 262 (CA); Collier v Pankhurst CA136/97 6 September 1999. To strike the defence out, the Court must be satisfied that thedefence is so clearly untenable that it cannot succeed: Attorney-General v Prince and Gardner; Couch v Attorney-General [2008] NZSC 45 at [33]. [53] In Attorney-General v Prince and Gardner, the Court of Appeal clarified that the strike out jurisdiction is to be exercised sparingly and only in a clear case where the Court is satisfied it has the requisite material (see also Gartside v Sheffield, Young & Ellis [1983] NZLR 37, 45; Electricity Corporation Ltd v Geotherm Energy Ltd [1992] 2 NZLR 641). However, the mere fact that applications to strike out raise difficult questions of law and require extensive argument does not exclude jurisdiction: Gartside v Sheffield, Young & Ellis. [54] The scope of r 186(b) is potentially very wide and defies exact definition:Heenan Family Trust 1960 & Ors v Da Vella June Gore & Ors HC DUN CIV 2006- 412-1023 8 October 2007. The applicant needs to go further than the literal words of the rule and establish "overtones of impropriety" but, subject to this, the words are to be given a "liberal interpretation": see McGechan on Procedure at HR186.03. Pleadings which will be covered by r 186(b) include:(a) "Proceedings which are both scandalous and irrelevant: In Van der Kaap v A-G (1996) 10 PRNZ 162, Hammond J, dealing sensitively with a lay litigant's diatribe, stayed the proceedings to afford an opportunity for claims to be repleaded on terms. This was despite his Honour's findings that striking out the irrelevant and scandalous material would have been appropriate and that striking out the whole proceeding would have been justified." (b) "Pleadings containing irrelevant material: Cowles v Prudential Assurance Co [1957] NZLR 124. In Davis v Russell McVeagh McKenzie Bartleet & Co [1994] 2 NZLR 175, Henry J found that allegations of improper conduct in the defence of proceedings against solicitors could not constitute an element of claims to exemplary damages, and were accordingly struck out."(McGechan on Procedure at HR186.03(b) and (e)). [55] Abuse of process under r 186(c) extends the grounds outlined in rr 186(a) and (b). It also defies precise definition but appears to subsume various instances ofmisuse of the Court's process. For example, r 186(c) will cover proceedings brought for an improper motive such as to obtain a collateral advantage beyond that which the law offers (Goldsmith v Sperrings Ltd [1977] 2 All ER 566 (CA); McGechan on Procedure at HR186.05). In Wattie v Hamburg Sudamerikanische Dampfschiffahrtsgesellschaft (1999) 14 PRNZ 227, the Court accepted that a contractual limitation barring the cause of action could be grounds for striking out the proceedings for abuse of process. [56] In its present application, ACC applies to strike out paragraphs [16](b) and (c), [20](b), [28] and [29] to [34] of the statement of defence and counterclaim. I will consider each of these paragraphs in turn.Paragraphs 16(b) and (c)[57] In the first sentence of paras [16](b) and (c) of the statement of defence and counterclaim Affco denies the allegations in [16](b) and (c) of the statement of claim, which are:(b) Save where an injured employee had made an election under s 28(6) of the IPRCA, the Defendant remained liable for the costs of statutory entitlements, and other costs and expenses and its obligations, as described in clause A4.6 of the Accreditation Agreement (clause 4.2.2). (c) Where the plaintiff assumed management of a claim under clause A4.2, the Defendant was not liable to pay any injured employee the entitlements it would otherwise be obliged to pay, but was obliged to reimburse the Plaintiff for, inter alia, all entitlements, costs and expenses incurred by the Plaintiff in relation to the claim together with other liabilities to the Plaintiff in respect of entitlements and other amounts specified in Schedule F.[58] ACC submits that these denials are denials of what the Agreement actually states. In my view, it is clear that Affco is not denying the terms of the Agreement but that the particular clauses apply here; that the allegations in paragraphs [16](b) and (c) are relevant here.[59] In the second sentence of paras 16(b) and (c) of the statement of defence and counterclaim, Affco pleads that clauses A4.2 and A4.6 impose no liability on Affco under the applicable facts of this case. This is explained by Affco on the basis that:• Clause A4.2.2 does not apply because ACC did not assume management of the claim pursuant to that provision;• ACC's assumption of management of the claim on 10 August 2003 was invalid or otherwise in breach of the Agreement; and• Even if either A4.2 or A4.6 had relevance, Affco's liability only extends to work-related personal injuries, and Mr Storey's injury was not work-related. [60] ACC again submits that Affco's pleading here raises disputes that are covered by the dispute resolution process in the Agreement and therefore the pleading should be struck out or stayed. I do not accept this submission, for the reasons given above. [61] Lastly, ACC contends that this pleading seeks to have the Court enter into the substance of a dispute as to whether Mr Storey sustained a work-related personal injury or not. However, ACC submits that the Court does not have jurisdiction to so enquire by reason of the terms of the Agreement (particularly clause 20.1 and Schedule B) and the privative provision in s 133(5) of the 2001 Act. [62] Section 133(5) provides:"(5) If a person has a claim under this Act, and has a right of review or appeal in relation to that claim, no court, Employment Relations Authority, Disputes Tribunal, or other body may consider or grant remedies in relation to that matter if it is covered by this Act, unless this Act otherwise provides."[63] ACC submits that Ramsay v Wellington District Court [2006] NZAR 136 considered a similar provision, namely s 134(4) of the preceding Accident Insurance Act 1998, which provided:"(4) If a person has a right to apply for a review or appeal about a matter, the person has no other remedy in relation to the matter, whether inany court, the Employment Tribunal, the Disputes Tribunal, or otherwise."[64] In Ramsay the Court of Appeal commented on this provision:"[30] s 134(4) is not a provision which generally excludes the jurisdiction of the High Court. It rather requires that challenges to decisions made under the Act, concerning rights to compensation, be brought under a prescribed procedure involving an initial statutory review, which can be followed by an appeal on the merits to the District Court. That appeal is in general by way of a rehearing on the record of the evidence that was given before the review but that may be supplemented by further evidence. If leave is given there are further rights of appeal on questions of law to the High Court and to the Court of Appeal. [31] As Goddard J observed in Accident Compensation Corporation v Wellington District Court [2001] NZAR 265, the statutory procedure is intended to ensure that disputes concerning Corporation decisions are speedily and finally resolved through a straightforward statutory process of administrative review, followed by a right of general appeal to the District Court. Further appeals to the High Court and Court of Appeal are restricted. They are confined to questions of law and require leave. Section 134(4) provides that this regime excludes other remedies including those available in judicial review. [T]he breadth of s 134(4) precludes challenges to all aspects of the matters it covers so that an approach of the kind taken in decisions such as Golden Bay Cement Co Ltd v Commissioner of Inland Revenue [1996] 2 NZLR 665 (CA), permitting the review of income tax assessments in the face of a privative provision, can have no application. [33] In the case of s 134(4) the drafter has been careful to confine the scope of the statutory exclusion of the courts to matters where theperson has a right to invoke the statutory process of review and appeal. Accordingly, if the perceived error or invalidity cannot be fitted within that procedure, then the exclusion of other remedies will not apply. This is clear on the language of s 134 and the presumption of interpretation does not arise for consideration. It will accordingly be sufficient, in the present case, for the appellant to maintain its judicial review proceeding if he can show that the grounds on which he relies in seeking judicial review remedies could not be determined under the statutory process. But if they are amenable to decision under the statutory scheme, the effect of s 134(4) is that the Court is barred from granting relief in the separate judicial review proceedings."[65] Ramsay has been applied in relation to s 133(5) of the 2001 Act in Spencer v The District Court HC WN CIV2006-485-1601 5 October 2007 and Dean v ACC[2007] NZCA 462, both of which involved persons claiming to be entitled to payments for injuries under the 2001 Act. [66] In response to this argument, Affco contends that s 133(5) does not apply here and so it is not precluded from disputing liability on the grounds that Mr Storey's injury was not work-related. Affco submits that the Court in Ramsay:"confined the scope of the statutory exclusion of the courts to matters where the person has a right to invoke the statutory process of review and appeal. Accordingly, if the perceived error or invalidity could not be fitted within that procedure, then the exclusion of other remedies would not apply."[67] Affco submits that the situation in Ramsay (where the Court found that the statutory exclusion did apply) can be distinguished from the present circumstances on three grounds. [68] Firstly, Affco submits that, unlike s 134(4) of the 1998 Act, which applied where a "person" had a right to apply for a review or appeal, s 133(5) only applies where a "person has a claim under this Act, and has a right of review or appeal in relation to that claim" – ie. it only applies to claimants. Affco notes that "claim" is defined in s 6 of the 2001 Act as meaning "a claim under s 48", which provides forpersons wishing to lodge a claim for cover and/or entitlement in relation to a personal injury he or she has suffered. Thus, neither an employer or levy payer is a "person who has a claim" as the term is used in the Act. [69] Affco argues that the Court should not give this section a wider, strained meaning because no justification exists to depart from the general rule that privative clauses should be construed narrowly. Moreover, Affco says that s 134 of the 2001 Act (which provides claimants, employers and levy payers a right to apply for review) shows that the legislature was well aware that there were three classes of people with rights of review but nevertheless restricted s 133(5) to only one of these classes. Counsel for Affco therefore relies on the principle expressio unius est exclusio alterius (express mention of one thing by implication excludes another). Moreover, Affco submits that the limited scope of s 133(5) was intentional as evidenced by the fact that clause 114(5) of the original Bill set out the same provision as the 1998 Act but was subsequently amended to the more restricted form. [70] The words used in s 133(5) are as amended by the Select Committee which considered the Bill. The Commentary to the Bill does not specifically explain why this change was made but does note that "[t]he problem that clause 114 seeks to address is that where a claimant has rights of review or appeal under the bill, no other court is to provide remedies for matters that the bill covers ". As such, it seems that the section is intended to have been aimed at claimants only. [71] The second ground Affco relies on to distinguish Ramsay is its contention that Affco did not have a ground of review here. Affco says that the legislation makes it clear that the decisions as to whether to accept a claim and whether the injury is work-related is a function to be undertaken by ACC (s 50 of the 2001 Act; see also s 64 of the 1998 Act). Under clauses 4.1.1 and A1.3 of the Agreement, Affco was required to perform this function on behalf of ACC. Therefore, Affco says that in making its original decision that Mr Storey's injury was work-related, Affco was not acting as an employer but as ACC's agent. It says that, having made that decision, Affco did not, in its position as ACC's agent, have a right of review in respect of the same, as ACC does not have a right of review.[72] Instead, ACC has the power to revise its decision of its own motion (s 65 of the 2001 Act; s 73 of the 1998 Act). Again, Affco says the Agreement provides that Affco may exercise this power: clauses 4.1.1 and A1.3. Affco says that it wished and intended to do this following ACC's advice that it considered Mr Storey's injury to be work-related (ie. Affco's responsibility) as evidenced by the letter of Mr Cox (the Employment Relations Manager for Affco) dated 30 March 2004. However, Affco says that ACC responded that Affco would need to have new information to change its decision and that ACC then "acted to prevent the defendant from revoking or amending its decision by purporting to formally take over management of the file under Clauses A4.2 and A4.6 of the Agreement". [73] ACC agrees that Affco did not have a right to apply for review of the decision in its capacity as ACC's agent, but says that it did have a right to apply for review in its separate capacity as an employer. In support of this argument, ACC relies on the following provisions of the Agreement:• Clause B1.1.2, which states that Schedule B outlines the scope of the Accredited Employer's authority to represent ACC on reviews and appeals and the procedures to be followed by an Accredited Employer when "a Claimant or a third party" wishes to apply for a review of the Accredited Employer's decision. ACC submits that the "third party" includes Affco and ACC.• Under Clause B3.1, the accredited employer is to make a decision on a claim within the time limits specified in (now) ss 56 and 57 of the 2001 Act and on reasonable grounds, and must give notice of that decision to the claimant. Clause B3.2 provides that notice must be given to the claimant "and third parties if applicable".• Clause B4.1 sets out what the Accredited Employer must do if a claimant "or third party" wishes to apply for review.• Clause 5.1 provides that the Accredited Employer must, on receiving an application for review, reconsider its decision and notify the claimant "and any third party (including ACC, if the decision is about cover or classification of the injury)" of the outcome.• If the matter is subsequently referred for a formal review, the Accredited Employer is required to provide specified documentation to the Claimant and to ACC and, under clause B6.3.5, ACC is required to notify the Accredited Employer and the Reviewer as to whether it "intends to appear as a party (if the Accredited Employer's decision is that the injury is a non-work injury or that ACC or some other insurer is the managing insurer". Except where the application for review is against a decision that the employee did not suffer a work-related personal injury, the Accredited Employer is required to represent ACC on the review: clause B6.5. The clause continues that "[w]here the exception applies, the Accredited Employer may represent its own interests as a party, and ACC may represent itself". ACC submits that this shows that the Accredited Employer can wear two hats.• Clause B7.4 provides that the Accredited Employer, "when acting in its capacity as an employer", may defend an appeal "as a party in its own right in respect of a review decision about whether an Injured Employee suffered a work-related personal injury". The clause goes on to state a requirement of obtaining ACC's approval where the Accredited Employer wishes to appeal "on behalf of ACC" against a review decision that an employee's injury was work-related. [74] Secondly, in relation to whether Affco could instead have reconsidered and revoked its decision (under s 65 of the 2001 Act), ACC submits that, under the Agreement, Affco could have exercised this power on behalf of ACC. It submits that this power is not time-limited and that Affco could have exercised it at any time during which it was managing Mr Storey's claim. ACC also contends that Affco transferred the claim to ACC in October 2003 – that it was not ACC who initiated this transfer. In support of this, ACC refers to the correspondence between the parties attached as exhibits to Mr Cox's affidavit. [75] In response, Affco submits that it did not retain an independent right as an employer (as opposed to in its capacity as ACC's agent) to apply for review of the decision. Affco denies that the "third party" referred to in the provisions cited by ACC includes the employer. In support of this it cites clause 1.6 of the Agreement,which is headed "No Third Party Rights". This clause states that nothing in the Agreement is intended to confer any enforceable right or benefit on any employee or other person and that the intention is that the Agreement be enforceable only by ACC and the Accredited Employer. The implication Affco draws is that the Accredited Employer is therefore not a third party. [76] Affco submits that there is no provision in the Agreement covering an employer applying for review of its own decision – and compares clause B4.1 (Affco's duties if a review is initiated by a claimant or third party) and clause B6.1 (Affco's ability to amend, revoke or substitute its initial decision) – and submits that this is because no such power of review was contemplated as being possible. Counsel for Affco also compares clauses B7.4 and B7.5 which enable an employer to appeal against a review decision relating to the classification of the injury. [77] Lastly, Affco also relies on Dean v ACC [2007] NZCA 462. Mr Dean had applied for a review of ACC's decision that his compensation payments were to cease. The review officer determined that a further specialist opinion should be obtained, quashed ACC's decision and directed it to obtain another report and issue another decision. Without contacting Mr Dean, ACC sought clarification from the review officer as to whether ACC was to reinstate Mr Dean's payments and the review officer said no. ACC then notified Mr Dean on 30 November 2004 that it would not be reinstating his payments. Mr Dean reviewed this decision. However, the second review officer held that the 30 November 2004 decision was not reviewable. A second report was completed in accordance with the first review officer's decision and the end result was that ACC decided on 3 June 2005 not to reinstate Mr Dean's payments. Mr Dean applied for judicial review in relation to ACC's failure to pay him compensation between the date his payments were stopped and 3 June 2005. ACC applied successfully to the High Court to strike out Mr Dean's application on the grounds that it was barred by s 133(5) but this was overturned by the Court of Appeal. Counsel for ACC had argued that Mr Dean could have pursued his rights under the statutory disputes resolution process, including by appealing to the District Court against the first review officer's decision. However, on this point the Court held that it was not reasonable to have expected Mr Dean toappeal against this decision because, on the face of it, Mr Dean was successful on this decision. [78] Similarly, Affco submits that while technically it might have had a review right separate from ACC's, it did not have one in reality because, as the decision- maker, it did not disagree with the decision (at the time). Instead, Affco's rights to amend its decision were under s 65. [79] Lastly, Affco submits that Ramsay can be distinguished because Affco's claim here is contractual. It argues that the issue of Affco's liability does not relate to whether the classification of Mr Storey's injury can be altered as between Mr Storey and ACC (or Mr Storey and Affco). It contends that the statutory dispute procedures do not give rise to review or appeal rights in respect of Affco's liability under the Agreement. It submits that Affco is entitled to defend any claim by ACC that it is liable under the Agreement on the ground that an injury is not work-related, irrespective of the position between Mr Storey and ACC. [80] Affco submits that support for this distinction between liability under the Agreement and under the 2001 Act can also be found in s 317(2) which states that a person is not prevented from bringing proceedings for damages relating to or arising from any express term of any contract of agreement. [81] On these aspects, I am not persuaded that s 133(5) does not apply merely because the remedy sought is contractual. Section 133(5) applies to preclude the Court from considering or granting any remedies in relation to a matter if it is covered by the Act – it is not restricted in its terms to excluding other statutory claims. [82] However, I accept Affco's argument that the terms of s 133(5) appear to restrict its application to claimants, and that this interpretation seems to be supported by the legislative background. Moreover, I do not think that Affco had a right to apply for review in the circumstances of this case. As in Dean v ACC, it is clearly nonsensical to say that Affco had a right to apply for a review of a decision with which, at the time, it agreed. Furthermore, I am not persuaded that "third party" includes the employer acting in its capacity as such. This seems to be inconsistent with clause 1.6. ACC relies heavily on clauses B6.3.5 and B6.5. However, on myreading, clause B6.5 states that the Accredited Employer must represent ACC on a review unless "the application for review is against a decision that the Injured Employee did not suffer work-related personal injury" (my emphasis). Here, the decision was that the injury was work-related and therefore these clauses seem to require Affco to represent ACC on any review, and not itself. Lastly, in my view it is significant that there is no provision for the employer having a right to review a decision as compared to a claimant or as compared to a right of appeal against a review. Lastly, I note that s 133(5) only applies where a person has a "right of review or appeal". Thus, it may well be irrelevant whether Affco had the power to reconsider its decision (which is a different process than reviewing or appealing under the Agreement and legislative framework). In any event, for the purposes of this application, I am not persuaded that there is no arguable defence open to Affco on the basis that ACC assumed management of the claim at or before the time at which Affco could reasonably have been expected to exercise the power under s 65. [83] Thus ACC has not established that s 133(5) applies here to preclude the Court from enquiring into whether Mr Storey's injuries were work-related and, consequently, whether Affco therefore is liable in relation to his claim. [84] As such, I am not satisfied that Affco's pleading in paragraph [16] is irrelevant and I decline to strike it out.Paragraph [20][85] Affco denies paragraph [20] of the statement of claim partly by pleading that, at the time of the incident, Mr Storey "went to and sat in his car with Jade Tahuri drinking whisky and smoking marijuana ". ACC contends that Affco has not explained the relevance of this pleading or why these assertions about Mr Storey have been made. It also submits that this paragraph pleads scandalous material, being material which is irrelevant to the resolution of any dispute there may properly be between the parties – and should therefore be struck out. [86] Affco submits that the only words that could be considered objectionable are those pleading that Mr Storey was "with Jade Tahuri drinking whisky and smoking marijuana". It contends that these words are relevant and necessary to comply with its obligation to fairly inform ACC of the nature of its defence to ACC's claim and,in particular, they are relevant to the application or otherwise of ss 28(1)(a) or (b) of the Act. [87] I accept that the matters referred to by Affco are relevant to the factual issue of whether Mr Storey was in fact at his place of employment (ie. a place occupied for the purposes of his employment) and/or "having a break from work for a meal or rest or refreshment". Affco submits that it is arguable that the definition of place of employment does not extend to a car into which a person has gone for the purposes of drinking alcohol and smoking illicit drugs. This raises the question whether Mr Storey's injury was work-related, which is relevant as to whether Affco is liable in relation to his claim. Given my finding that s 133(5) does not apply to preclude the Court from considering these matters here, I find that the pleading is relevant and is not scandalous in the sense of r 186.Paragraph [28][88] Here, ACC takes issue with the assertions in paras [28](b) and (c) – namely, that Affco has no liability for non-work-related personal injuries and that Mr Storey's injuries were not work-related, for the reasons given. Again, ACC says that Affco is trying to raise the issue of whether Mr Storey's claim was work-related, with respect to which the Court does not have jurisdiction by virtue of s 133(5). As such, ACC submits that these pleadings (particularly paras [28](c)(i) and (ii) (see above para [24](d)(i) and (ii)) are therefore irrelevant because, given the limits of the Court's jurisdiction, the Court has no proper remit to deal with them. [89] ACC submits that the pleadings (again particularly paras [28](c)(i) and (ii)) are also scandalous – that, even if the Court did have jurisdiction to deal with them, they are irrelevant to any issue that would be before the Court and appear to be made so as to provide an apparent basis for the introduction of prejudicial material, such as the affidavit of Mr Cox. [90] Lastly, ACC submits that the matters referred to in paras [28](c)(iii) and (iv) (see above para [25](d)(iii) and (iv)) do not appear to be relevant in any aspect, even to Affco's own case.[91] Again, I find that the matters raised by Affco are relevant. I have already found that s 133(5) does not apply here. The matters raised in para [28](c)(i) to (iv) address the elements of the definition of a work-related personal injury and are therefore relevant to the issue whether Affco is liable in relation to Mr Storey's claim. Although it seems clear that the alternative elements in para [28](c)(iii) and (iv) (referring to 28(1)(c) and (d)) are not relied upon by Mr Storey or ACC to establish that his claim was work-related, they are nevertheless relevant to Affco's case of comprehensively refuting that Mr Storey's injury was work-related. As such, I am satisfied that this paragraph should not be struck out.Paragraphs [29] to [34][92] In seeking to have these paragraphs struck out, ACC relies entirely on its arguments that they raise matters covered by the dispute resolution process and therefore should be dealt with under that process, not by the Court. I have considered this argument above and, for the reasons given, find that the Court has jurisdiction to deal with these matters in that ACC has waived its right to seek a stay and referral. As such, I am satisfied that these paragraphs too should not be struck out.Result[93] For the reasons I have outlined above, ACC fails both on its application for a stay and orders referring the parties to arbitration, and on its application to strike out parts of Affco's statement of defence and counter-claim. [94] As to costs, the defendant Affco has been successful in opposing these applications and, in my view, is entitled to an order for costs in the normal way. Costs are therefore awarded against ACC with respect to these applications calculated on a 2B basis, together with disbursements if any as approved by the Registrar.'Associate Judge D.I. Gendall'