George v Accident Rehabilitation and Compensation Insurance Corporation

IN THE DISTRICT COURT HELD AT WHANGAREI Decision No. 15 6 /97 UNDER The Accident Rehabilitation and Compensation Insurance Act 1992 AND IN THE MATTER of an appeal pursuant to section 91 of the Act BETWEEN ANTONY STEVEN GEORGE of Whangarei Appellant (Appeal No. DCA 92/97) AND ACCIDENT REHABILITATION AND COMPENSATION INSURANCE CORPORATION a body corporate duly constituted under the provisions of the said Act Respondent HEARD on the 18th day of July 1997 APPEARANCES CL Cook for appellant A D Barnett for respondent DECISION OF JUDGE A W MIDDLETON The issue in this appeal is whether the appellant is entitled to have an overpayment of his independence allowance remitted. The amount of the overpayment is $1,497.62. The appellant suffered an injury to his right leg in an accident on 19 January 1994 and in August 1995 he was assessed as having a 100% entitlement to an independence allowance backdated to 20 April 1994 being 13 weeks from the date of the accident. 2 In November 1996 when reviewing the file, the respondent became aware that in calculating the quantum of the independence allowance it had failed to make a deduction of 8.8% in respect of a prior permanent impairment assessment for which compensation was paid under the 1982 Act. Consequently, on 26 November 1996 the respondent issued a decision advising the appellant of the overpayment of $1,497.62 for the period 20 April 1994 to 28 November 1996. The respondent requested recovery of the overpayment. The appellant applied for a review of that decision. The appellant did not appear at the review hearing and the Review Officer gave him 21 days in which to supply details of his financial circumstances so that he could consider the merits of the respondent's decision. When no statement was provided the Review Officer issued his decision on 11 March 1997. On 7 April 1997 the appellant filed an appeal against the Review Officer's decision confirming the respondent's primary decision. On 17 June 1997 the appellant provided a statement of his position. In that statement he said that he receives earnings related compensation of $127 per week. He said that when he inquired for an entitlement to an independence allowance he was advised by the respondent that he had no entitlement but subsequently after seeking legal advice, he was assessed for the independence allowance. The appellant said that the form of application in which question 6 asked "have you ever had a claim with ACC for another injury?" provided two boxes for a "yes" or "no" answer. The application form shows that the appellant ticked the "yes" box. Question 7 asked "have you ever received lump sums from Accident Compensation Corporation?". Again two boxes are provided for a "yes" or "no" answer and the appellant has ticked the yes box. That application was signed by the appellant and dated 10 July 1995. An initial assessment of his disability provided a payment of $535 every thirteen weeks which represented approximately $41 per week. The appellant requested a backdating of the payment which was made but which resulted in an increase in his tax liability because the back payment was received in one lump sum. The appellant is now indebted to the Inland Revenue Department in the sum of $729. The appellant said that for two years he received a payment of $535 every thirteen weeks but after the respondent's decision of 26 November 1996 the payment was reduced to $440 every thirteen weeks. The appellant's current financial position now is that he has a gross weekly income of $245 from which he pays $45 for child support, $34.68 for tax and $140 per week board. This leaves him with approximately $25 per week but he has outstanding debts of $405 for insurance, $729 for tax and solicitor's fees of $890 together with an outstanding loan of approximately $3,000. Ms Cook submitted that the appellant is in an extremely tight financial position and is in no position to alter that. He used all the income he received in payment of his then debts but is still in much the same position as he was before. She submitted that he had received the payments in good faith and had relied on the fact that he was entitled to them. She submitted that he then had outstanding debts and still has outstanding debts and had simply used the funds in his day to day living by keeping debtors at bay. 3 Mr Barnett submitted that the only alteration in the appellant's position was that he had reduced outstanding debts by the use of the overpayments so that by payment of an equivalent amount now in reduction of the overpayment he would not be in any worse position than previously had the correct assessment been made. Mr Barnett submitted that the issue was similar to the appellant in Satherley v ARCIC (150/96) in which Judge Lovell-Smith had noted the requirements of section 77 of the Accident Rehabilitation and Compensation Insurance Act 1992 and section 94B of the Judicature Act 1908. In her decision Judge Lovell-Smith cited with approval a passage from a decision of Hardie Boys J in Hollidge v Bank of New Zealand (High Court, Nelson; M1840; 29 March 1982) in which he said: "The mere fact that the present Appellant has spent the money is not enough to establish detriment .... nor is the relevant enquiry necessarily whether he has altered his mode of living. The real question is whether he will suffer detriment by being required to repay. That question can be answered only by considering whether the disadvantage of having to find the money to repay is offset by advantages derived from its earlier expenditure. The onus of proving detriment lay on the Appellant and I am not satisfied that he has discharged it." Mr Barnett submitted that the same principles applied in this case and that although the appellant had modest means he had not altered his position in a practical sense in reliance upon the payments. He submitted that it would not be inequitable to require payment of the overpayment as the disadvantage of having to pay was offset by the advantages derived by the use to which he put the overpayment. He submitted that the appellant could make a modest reduction of approximately $10 per week without creating any hardship. The issue falls to be decided under section 77(2) which provides: "The Corporation shall remit in whole or in part a debt which arose as a result of an error not intentionally contributed to by the debtor if the Corporation is satisfied that the person receiving the amount so paid in error did so in good faith and has so altered his or her position in reliance on the validity of the payment that it would be inequitable to require repayment." There is no doubt that the appellant in no way contributed to the error made by the respondent. His application for the independence allowance clearly stated that he had been the recipient of lump sum compensation under the 1982 Act but it was not until two years later that the respondent discovered its own error. There is also no doubt that at all times his financial position has been perilous. He clearly had outstanding debts which he had incurred simply because of his low income and he used the payments of the independence allowance in partial reduction of those debts but without making any significant inroads on them. He is still in a position that he has substantial debts when compared with his extremely modest income. 4 While Mr Barnett referred me to the decision in Satherley and the reference to the Hollidge case I consider that the factual basis of both cases is quite different from the factual basis in this appeal. In Satherley that appellant was on an individual rehabilitation programme and work trial. The memorandum which he had signed clearly notified him of the requirement to account for any earnings that he received while undertaking other work during the period of incapacity. That appellant apparently did quite an amount of work which subsequently came to notice and resulted in an overpayment which that appellant repaid himself. However, a similar situation arose again in which that appellant failed to notify the respondent of earnings as a result of which overpayments occurred. Judge Lovell-Smith referred with approval to the Hollidge case. In that case Hollidge's bank account had been incorrectly credited with the sum of $1,133.68 which did not belong to him. While he checked the bank for the origin of the money without success he assumed that it had come from a bequest from a relative although he had no advice to that effect. I consider that the facts of both Hollidge and Satherley are quite different from the facts here. In both of those cases the recipient of the money knew or should have known that they had no entitlement to them. In contrast, this appellant completed his application for the independence allowance correctly and gave the correct information. It was not for him to know how the assessment was made and he accepted the payments in good faith. I consider that having regard to his desperate financial position and the fact that he in no way contributed to the mistake, it is not now equitable to require repayment of the overpayment. The appeal is allowed and there will be costs of $800. DATED at WELLINGTON this 4th day of August 1997 A W Middleton District Court Judge dca92-97.doc (nr)