ACCIDENT COMPENSATION CORPORATION v ANDERSON & O’LEARY LIMITED [2023] NZCA 198

ACCIDENT COMPENSATION CORPORATION v ANDERSON & O'LEARY LIMITED [2023] NZCA 198[29 May 2023]IN THE COURT OF APPEAL OF NEW ZEALANDI TE KŌTI PĪRA O AOTEAROACA563/2022[2023] NZCA 198BETWEEN ACCIDENT COMPENSATIONCORPORATIONAppellantAND ANDERSON & O'LEARY LIMITEDRespondentBETWEEN ACCIDENT COMPENSATIONCORPORATIONAppellantAND BUILDING CONNEXION LIMITEDRespondentBETWEEN ACCIDENT COMPENSATIONCORPORATIONAppellantAND SOUTHERN LAKES BUILDINGLIMITEDRespondentCourt: Collins and Mallon JJCounsel: D A Laurenson KC and C J Hlavac for AppellantV T J Sullivan for Anderson & O'Leary LimitedA J Isherwood and G D Pearson for Southern Lakes BuildingLimited and Building Connexion LimitedJudgment:(On the papers)29 May 2023 at 3 pmJUDGMENT OF THE COURTA The application for leave to amend the grounds of appeal is declined.B Costs on the application are reserved.____________________________________________________________________REASONS OF THE COURT(Given by Mallon J)Introduction[1] The Accident Compensation Corporation (ACC) is required to classifyemployers in an industry or risk class that most accurately describes their activity forthe purposes of setting levies payable by employers under the Accident CompensationAct 2001(the Act).1 In 2019 ACC changed the classification of the respondents'activities to timber wholesaling, which had the effect of requiring them to payhigher levies. The respondents sought review of the reclassification, leadingultimately to the High Court dismissing ACC's appeal from the District Court decisiondetermining that the appropriate classification for each respondent's activity washardware and building supplies retailing.2[2] ACC was granted leave by the High Court to appeal to this Court on thefollowing question of law:3Was the High Court correct to conclude that s 170(2) of the Act will only beengaged where an employer operates two or more separately identifiablebusinesses, each of which must be a separate and distinct activity?[3] ACC now applies for leave to amend the grounds of appeal to include thefollowing additional questions:4(a) For the purposes of s 170 of the Act, in circumstances where anemployer carries out one integrated operation, can:(i) an "activity" include an act, action or task and/or a series ofacts, actions or tasks?(ii) the employer be engaged in more than one "activity"?(b) In circumstances in which an employer sells timber and other products– including, for example, plumbing supplies, hardware and building1 Accident Compensation Act 2001, s 170.2 Accident Compensation Corporation v Southern Lakes Building Ltd [2022] NZHC 1288[High Court decision].3 Accident Compensation Corporation v Anderson & O'Leary Ltd [2022] NZHC 2517[Leave decision].4 Pursuant to r 34(2)(b) of the Court of Appeal (Civil) Rules 2005.supplies – to both the general public and to trade customers as part ofthe same integrated operation, can the sale of timber to tradecustomers constitute an "activity" for the purposes of section 170 ofthe Act?(c) In circumstances in which an employer is engaged in selling the samegoods to both businesses and to the general public, which part/s of theDivision F (Wholesale Trade) and Division G (Retail Trade)definitions in the Australian and New Zealand Standard IndustrialClassification 2006 should be applied in determining whether, for thepurposes of s 170 of the Act, the employer should be classified withinthe relevant wholesaling classification unit and/or the relevantretailing classification unit, set out in the Accident Compensation(Work Account Levies) Regulations?[4] The respondents oppose this application.Background[5] Section 170 of the Act provides:170 Classification of industries or risks(1) For the purpose of setting levies payable under sections 168, 168B,and 211, the Corporation must classify an employer and aself-employed person in an industry or risk class that most accuratelydescribes their activity, being an industry or risk class set out inregulations made under this Act.(2) If an employer is engaged in 2 or more activities, the Corporation mustclassify all the employer's employees in the classification unit forwhichever of those activities attracts the highest levy rate under theregulations.(3) Despite subsection (2), the Corporation may classify the employer'semployees in separate classification units for different activities if theemployer meets the threshold (if any) specified in regulations and if—(a) the employer so requests; and(b) the employer is engaged in 2 or more distinct and independentactivities; and(c) each of those activities provides services or products toexternal customers in such a way that each activity could,without adaptation, continue on its own without the otheractivities; and(d) accounting records are maintained by the employer to thesatisfaction of the Corporation that—(i) demonstrate the separate management and operationof each activity; and(ii) allocate to each activity the earnings of employeesengaged solely in that activity.[6] "Activity" is defined in s 6(1) of the Act:activity, for the purposes of Part 6,—(a) means a business, industry, profession, trade, undertaking of anemployer, a self-employed person, or a private domestic worker; and(b) includes ancillary or subservient functions relating to the activity,such as administration, management, marketing and distribution,technical support, maintenance, and product development; and(c) in the case of a self-employed person, refers to the nature of his or herwork rather than the context or business in which he or she is working.[7] The Accident Compensation (Work Account Levies) Regulations 2017 containa list of classification units (CUs). Each CU provides a description of a businessactivity and the applicable levy for the activity.[8] The respondents all operate timber and hardware stores that sell timber andhardware products both to members of the public and those engaged in trade.Up until 2019, the business activity of Building Connexion Ltd and Southern LakesBuilding Ltd was assigned CU45390 – Hardware Goods Wholesaling (not elsewhereclassified). The classification assigned to Anderson & O'Leary Ltd was CU52330 –Hardware and Building Supplies Retailing. In 2019 ACC reclassified the businessactivity of all the respondents to CU45310 – Timber Wholesaling. This resulted in ahigher levy due to the activity being assessed as having a higher level of workplaceinjury risk.[9] The respondents applied to ACC for review of the reclassification decisions.5The review process resulted in ACC's decisions in respect of Southern Lakes BuildingLtd and Building Connexion Ltd being set aside, and its decision relating to Anderson& O'Leary Ltd being modified.5 Pursuant to ss 134(5) and 236(1) of the Accident Compensation Act.[10] ACC appealed to the District Court in respect of the decisions set aside andAnderson & O'Leary appealed in respect of the decision relating to it.6 Judge Sinclairheld that the appropriate classification for each of the respondents' businesses wasCU52330 – Hardware and Building Supplies Retailing.7[11] ACC then appealed to the High Court on questions of law.8 ACC argued thatthe sale of timber to trade customers by each of the respondents constituted an"activity" in its own right. This meant that under s 170(2) it was required to classifythe respondents according to the activity that attracted the highest levy. This wasCU45310 – Timber Wholesaling.[12] The High Court disagreed. Justice Lang found that s 170(2) was only engagedwhere an enterprise operates two separately identifiable businesses, with each businesshaving a separate and distinct activity.9 This was not the case for the respondents.They each sold a wide range of different products within and around the samepremises. Customers had the same ability to view and purchase all products regardlessof whether they were members of the public or engaged in trade. The only differencein the way they were treated was the price they paid at the point of sale. Therefore, inthe Judge's view, the respondents operated a single integrated business at each store.10[13] Having determined that s 170(2) was not engaged, the Judge went on toconsider whether CU45310 – Timber Wholesaling was the correct classificationunder s 170(1). The primary issue here was whether the Court could (and should)have regard to the full definitions of "wholesale trade" and "retail trade" in theAustralian and New Zealand Standard Industrial Classification 2006 (ANZSIC).ACC argued that it was not permissible to go beyond the provisional classification ineach of those definitions, contending that the expanded preambles following theopening paragraphs were not relevant when determining the correct classificationunder s 170(1).6 Pursuant to s 149(1)(a).7 Accident Compensation Corporation v Building Connexion Ltd [2021] NZACC 41;Accident Compensation Corporation v Southern Lakes Building Ltd [2021] NZACC 42; andAnderson & O'Leary Ltd v Accident Compensation Corporation [2021] NZACC 43.8 Pursuant to s 162 of the Accident Compensation Act.9 High Court decision, above n 2, at [35].10 At [36].[14] The Judge considered that the factors identified in the expanded preamblesprovided useful guidance for determining whether the respondents were mostaccurately described as retailers or wholesalers for the purposes of the Act.11 Applyingthose factors, the Judge concluded that the classification of CU52330 – Hardware andBuilding Supplies Retailing most accurately described the activities in which therespondents were engaged.12[15] ACC applied to the High Court for leave to appeal to this Court.13The questions of law on which it sought leave were the same the questions of law inrespect of which it now seeks leave to amend the grounds of appeal to include.The Judge granted leave to appeal on the single question that he formulated as set outabove (at [2]). In doing so he said that "[a]t the heart of [his] decision was [his]conclusion that s 170(2) of the Act will only be engaged where an enterprise operatestwo separately identifiable businesses".14 The Judge went on to say that if any partyconsidered it necessary for additional questions of law to be argued, they could raisethose with this Court.15[16] After filing its appeal in this Court, ACC filed an application to amend thegrounds of appeal. It says that the further questions it has formulated (at [3] above)are additional important questions of law which are capable of bona fide and seriousargument.Relevant law[17] Appeals to this Court on questions of law under the Act are provided for ins 163:163 Appeal to Court of Appeal on question of law(1) A party to an appeal before the High Court under section 162 who isdissatisfied with any determination or decision of the Court on theappeal as being wrong in law may, with the leave of the High Court,appeal to the Court of Appeal by way of case stated for the opinion ofthat court on a question of law only.11 At [42].12 At [47].13 Pursuant to s 163 of the Accident Compensation Act.14 Leave decision, above n 3, at [5].15 At [6].(2) If the High Court refuses to grant leave to appeal to the Court ofAppeal, the Court of Appeal may grant special leave to appeal.(3) An appeal to the Court of Appeal must be dealt with in accordancewith the rules of the court.(4) The decision of the Court of Appeal on any application for leave toappeal, or on an appeal under this section, is final.[18] Given that the application to amend the grounds of appeal seeks to identifyfurther questions of law for the purposes of an appeal under s 163, cases discussingthe threshold for the grant of leave under s 163 will be relevant. In Cullen v AccidentCompensation Corporation, this Court articulated the following principles applyingto the grant of special leave under s 163(2):16[5] This Court has [the] power to grant special leave to appeal unders 163(2) of the Act. The principles applicable to an application for leave unders 67 [of the] Judicature Act 1908 apply equally to an application under s 163of the Act. The Court will exercise this power if satisfied that there is a seriousquestion of law capable of bona fide and serious argument in a case involvingsome interest, public or private, of sufficient importance to outweigh the costand delay of a further appeal. Other relevant considerations include thedesirability of finality of litigation and the overall interests of justice.The primary focus is on whether the question of law is worthy ofconsideration.Assessment[19] ACC submits that the first and second proposed additional questions ([3(a) and(b)] above) are encompassed by the question of law for which leave has been granted.This is because it submits that the answer to this question is "no", based on a correctinterpretation of "activity" addressed by the first and second proposed additionalquestions. Leave is sought to add these questions only to protect against the Courttaking a narrower view of the question of law for which leave has been granted.[20] We agree with the respondents that there is no need to amend the question oflaw for which leave has been granted to add these proposed additional questions.That is because we agree with ACC that its submissions on the approved question willnecessarily encompass its submissions as to the meaning of "activity" that its proposed16 Cullen v Accident Compensation Corporation [2014] NZCA 94 (footnotes omitted).Those principles were recently affirmed by this Court in Larkin v Accident CompensationCorporation [2020] NZCA 597 at [23], finding that the test in Cullen need not be disturbed, as italready set an appropriately high bar for leave and was well-established.additional questions are intended to address. How this question of law is ultimatelybest formulated and answered will be for the Court hearing the appeal.[21] As to the third proposed additional question of law ([3(c)] above), ACCcontends that applying the full ANZSIC definitions excludes the possibility of afinding that an employer is engaged in both wholesale and retail activities. It submitsthat this defeats the purpose of s 170 to classify based on the highest risk activity.The respondents submit the question is not capable of bona fide and serious argument— the definitions should be considered as a whole when used as interpretative aids.[22] In the District Court, ACC's argument was rejected. The Judge held that thewords in the first paragraph of each definition could not be read as providing thecomplete definition of "wholesale trade" and "retail trade". The Judge did not agreewith ACC's submission that the additional factors in subsequent paragraphs were onlyincluded in the definitions to assist in determining the "predominant activity" of abusiness unit for the purposes of the ANZSIC, which is not a consideration in respectof the Act's levy classification scheme. Instead, the Judge held that the additionalfactors further defined/clarified the broad definitions set out in the first paragraphs.17[23] The High Court agreed. The Judge held that the two ANZSIC definitions inquestion contained "unbroken narrative[s]", and subsequent paragraphs built on thematerial contained in the first paragraphs.18 In the present case, the specificity of theadditional factors meant they provided useful guidance when considering whether therespondents were most accurately described as retailers or wholesalers for thepurposes of the Act.19[24] We consider it is not necessary to grant leave to amend the grounds of appealto add this proposed additional question. That is because the High Court used theANZSIC definitions only as an interpretative aid to determine the correct classificationof each respondent's activity having already determined that s 170(2) did not apply.17 Accident Compensation Corporation v Building Connexion Ltd, above n 7, at [41]–[44];Accident Compensation Corporation v Southern Lakes Building Ltd, above n 7, at [43]–[46]; andAnderson & O'Leary Ltd v Accident Compensation Corporation, above n 7, at [46]–[49].18 High Court decision, above n 2, at [41].19 At [42].The Judge's approach did not therefore deprive s 170(2) of its purpose. We furtherconsider that, in addressing the question of law on which leave has been granted, it isopen to ACC to address whether the Court's approach to s 170(2) defeated its purpose.Result[25] The application for leave to amend the grounds of appeal is declined.[26] Costs on the application are reserved.Solicitors:Young Hunter, Christchurch for AppellantEY Law Ltd, Auckland for Anderson & O'Leary LtdIsherwood Le Gros Law Ltd, Nelson for Southern Lakes Building Ltd and Building Connexion Ltd