Akaroa Salmon New Zealand Limited v Accident Compensation Corporation

IN THE DISTRICT COURT HELD AT WELLINGTON Decision No. 348 /2000 UNDER The Accident Insurance Act 1998 AND IN THE MATTER of an appeal pursuant to section 152 of the Act BETWEEN AKAROA SALMON NEW ZEALAND LIMITED of Christchurch Appellant (Appeal No. Al 432/2000) AND ACCIDENT COMPENSATION CORPORATION a body corporate duly constituted under the provisions of the said Act Respondent HEARING at CHRISTCHURCH on the 29th day of November 2000 APPEARANCES/COUNSEL L P Mulinder for appellant H Evans for respondent RESERVED JUDGMENT OF JUDGE A W MIDDLETON [1] The issue in this appeal is whether the appellant is a "first scheme employer" or a "later schemes employer" for the purpose of assessing employer premiums for the period 1 April 1998 to 30 June 1999 [2] The appellant was incorporated on 24 June 1974 under the name of Tome Developments Limited. The Companies Office record discloses that on 24 June 1988 the company name was changed from "Tomel Developments Limited" to "Akaroa Salmon New Zealand Limited". It appears from the evidence that Tomel Developments Limited operated as a building company until the change of name in 1988 when it commenced the operation of salmon farming. [3] Throughout the period from 1980 to the time the name was changed, the company paid ACC premiums and thereafter continued to pay ACC premiums. The company made no request for an adjustment in premiums when it ceased business as a builder and commenced business as a salmon farmer. 2 [4] The respondent assessed the appellant as being a "later schemes employer" as defined in section 464 of the Accident Insurance Act 1998 and thereby liable on 1 July 1999 to pay levies for the period 1 April 1998 to 31 March 1999 and for the period 1 April 1999 to 30 June 1999. [5] The appellant considers that it is a "first scheme employer" as defined by section 464 of the 1998 Act and on that basis can only be required to pay a levy for the period 1 April 1999 to 30 June 1999. [6] Section 465 of the Accident Insurance Act 1998 states: " 465. "Clean Slate" Purpose---The purpose of sections 466 to 477 is to ensure that at the commencement of this Act all liabilities of employers and self-employed persons to pay premiums under the former Acts (continued otherwise by this Part) are converted into quantifiable debt so that employers and self-employed persons may enter into the new competitive accident insurance environment from 1 July 1999 with known premium obligations." [7] Sections 466 and 467 state: " 466. Employer base premiums for 1998/99 premium year--- (1) This section applies to all later schemes employers. (2) Every later schemes employer is liable as at 1 July 1999 to pay to the Corporation (in accordance with section 477) the relevant amount of base premium (payable in respect of the Employers' Account under section 101 of the Accident Rehabilitation and Compensation Insurance Act 1992 and any regulations made under it) for the 1998/1999 premium year. (3) Subsection (2) applies despite section 117 of the Accident Rehabilitation and Compensation Insurance Act 1992 and any regulations made under it which would otherwise require any such employer to pay that premium to the Commissioner. (4) This section comes into force on 1 April 1999." " 467. Employer base premiums in relation to 3-month premium---(1) This section applies to both first scheme employers and later schemes employers. (2) ALLemployers to whom this section applies are liable as at 1 July 1999 to pay to the Corporation (in accordance with section 477) the relevant amount of base 3-month premium (payable in respect of the Employers' Account under section 101 of the Accident Rehabilitation and Compensation Insurance Act 1992 and any regulations made under it). (3) Subsection (2) applies despite section 117 of the Accident Rehabilitation and Compensation Insurance Act 1992 and any regulations made under it which would otherwise require any such employer to pay that premium to the Commissioner. (4) This section comes into force on 1 April 1999." 3 [8] A "first scheme employer" is defined in section 464 of the Act as: " "First scheme employer" means an employer who was, on 31 March 1980, in business as an employer and who has continued to be an employer, in relation to that business, until the commencement of this Act:" [9] The same section defines a "later schemes employer" as: " "Later schemes employer" means an employer who is not a first scheme employer, and who has been an employer under any of the former Acts and has continued to be an employer until the commencement of this Act:" [10] The appellant's submission is that it has continued to be an "employer" from the date of its incorporation and the mere change of name did not constitute a change in its identity as an employer. [11] The respondent relies on the definition of "first scheme employer" and in particular the words "and who has continued to be an employer, in relation to that business, until the commencement of this Act". [12] The respondent submits that the business commenced in 1980 as a builder and that if it is sufficient that the employer continue in any business then the words 'in relation to that business" would be superfluous. [13] The employer premium payments scheme has the effect of requiring a payment of levies in advance. That method of payment continued until the 1981 regulations which required employers who became employers after 31 March 1980 to pay their employment premium levies in arrears. [14] With the inception of the Accident Insurance Act 1998 there were employers who have been employers prior to 31 March 1988 and thereby had paid their premiums one year in advance while those who became employers after that date had not. By virtue of the definition of "first scheme employer" those employers were only required to pay for the three months from 1 April to 30 June 1999 as a result of having paid in advance for the previous twelve months. [15] The words "in relation to that business" had been used in previous legislation and were interpreted by the Privy Council in NZ Forest Products Lid v ACC [1995] 3 NZLR 257. The Privy Council noted at page 261 of that decision: " Their Lordships recognise that the phrase the disposal of "his" business could be considered as meaning the disposal of his entire business. If it stood alone that might be the correct interpretation. But this phrase cannot be read in isolation. In the first place an employer who has to submit a statement of earnings under s 43 is still an employer who is required to furnish a reconciliation statement pursuant to and for the purposes of s 353(1)(f) of the Income Tax Act 1976. As already shown that obligation on cessation falls upon a person who disposes of or ceases to carry that obligation on "any business". If, as must be accepted, the phrase "his business" is capable of either interpretation, it seems to Their Lordships, in the 4 absence of any clear indication that a change was intended or any reason for such a change being given, that the natural interpretation is one which continues to read s 43(2) in a way which is the same as or consistent with s 353(1)(f). No such counter-indication or reason is given to justify reading "his" business more widely than "any business"." [16] Later at page 262 the Court said: Their Lordships have given full weight to the fact that the Court of Appeal in the judgment of Richardson J, and Ellis J in the High Court, concluded that under the New Zealand legislation the adjustment fell to be made only on total cessation by an employer of all his business activity." [17] A similar issue came before His Honour Judge Beattie in Price (279/2000). In that case Judge Beattie stated: "For the purposes of both employee PAYE taxation and ACC payments it was the firm that was the entity carrying on the business and which was responsible for PAYE payments and ACC premiums." (my emphasis) [18] Later in the decision Judge Beattie stated: 'The fact that that business was still a legal practice does not bring it within the particularity that is required from the meaning of the words that business in the definition of First Scheme Employer. I agree with counsel for the respondent's submission that the word business cannot be used in its classification sense but must have particularity relating to whether it was the same business that had been paying Employer Premium levies in advance prior to 31 March 1980." (my emphasis) [19] I agree with and adopt Judge Beattie's findings. The facts of the present case must presumably be that the objects of the company were sufficiently wide to enable it to change its business activity without the need for a change of objects. This would appear to be confirmed by the copies of the accounts for the year ending 31st March 1987 which, while they were headed "Tomel Developments Limited" have underneath that "Akaroa Salmon Trading Account" and thereafter follow details of the accounts in relation to salmon trading. [20] I consider that the same company continued as a business entity throughout the period from its incorporation in 1974. [21] While Mr Evans submitted that the respondent's case was supported by Judge Beattie's decision in Price, I do not agree with that submission. [22] I agree with Mr Mulinder's submission that the phrase "in relation to that business" in the Act means "in relation to its business (i.e. is trying to make a profit) as an employer." I agree with Mr Mulinder that the intention of the legislature was that the employer should have been "in business" as an 5 employer throughout the period and that the nature of the business activities are clearly irrelevant as far as the definition is concerned. [23] I consider that on the basis of Judge Beattie's finding in Price, this appellant was the same business entity from its incorporation on 24 June 1974 until 1999. While it may have changed the nature of the business by giving up its building business and promoting its salmon farming business, it was still the same business entity which was paying its employer premium levies in advance prior to 31 March 1980. The fact that it changed the nature of its operation may have attracted premiums at a different rate from that which applied when the only operation was that of building but that is irrelevant to this appeal. [24] I conclude that the decisions of the respondent and the Reviewer were wrong and that the appeal should be allowed. I consider that the appellant should be classified as a "first scheme employer" for premium purposes. There will be costs to the appellant of $1,000. DATED at WELLINGTON this 21 st day of December 2000 bemadlibin A W Middleton District Court Judge ai432-2000.doc (nr)