Coutts v Accident Rehabilitation and Compensation Insurance Corporation

IN THE DISTRICT COURT HELD AT WELLINGTON Decision No. 26 7 /98 UNDER The Accident Rehabilitation and Compensation Insurance Act 1992 AND IN THE MATTER of an appeal pursuant to section 91 of the Act BETWEEN BARRY COUTTS of Hamilton Appellant (Appeal No. DCA 441/97) AND ACCIDENT REHABILITATION AND COMPENSATION INSURANCE CORPORATION a body corporate duly constituted under the provisions of the said Act Respondent HEARING at AUCKLAND on the 26th day of November APPEARANCE/COUNSEL D M Carden for appellant C Bright for respondent RESERVED JUDGMENT OF JUDGE A W MIDDLETON The issue in this appeal is whether the respondent was entitled to reassess the appellant's relevant earnings for the purposes of payment of weekly compensation. The appellant and his wife were dairy farmers at the time the appellant suffered personal injury by accident when he fell from his tractor in September 1989. The assessment of the appellant's entitlement to earnings related compensation was made on 8 November 1989 based on his return of income to the Inland Revenue Department for the year ended 31 March 1989, the total being $49,876.45. The 2 appellant received earnings related compensation based on that return of income for a number of years until the respondent reconsidered the position in February 1993 when it appeared that the income for the year ended May 1989 was substantially higher than his income in the preceding years. An inquiry to the appellant's accountant elicited that in the 1988 and 1989 years the appellant and his wife had taken on an additional contract milking job as well as milking their own herd. Further, the sum of $26,816.29 included in the income for the 1989 tax year represented deferred livestock payments arising out of the sale of a milking herd some 5 years earlier. The respondent then submitted details of the appellant's earnings to KPMG Peat Marwick, chartered accountants, for a report. In a report dated 20 August 1993 the accountants noted that the appellant's income over the period of 4 years immediately preceding the injury averaged $20,939. On 17 July 1987 the respondent notified the appellant that it had incorrectly assessed the rate of weekly compensation because the 1989 figure had been grossly inflated by the inclusion of the deferred livestock sale profits. The decision letter stated that relevant earnings should have been assessed by taking an average of his earnings over the 4 years prior to the date of accident which provided a figure of $20,939.25. The letter also advised the appellant that the respondent would assess the amount of the subsequent overpayment but that is not in issue in this appeal. The appellant applied for a review of the respondent's decision. At the review hearing the appellant was represented by counsel who submitted that as this issue arose after the 1982 Act had been repealed by the 1992 Act, the issue was now governed by s.41 of the Accident Rehabilitation and Compensation Insurance Act 1992 by virtue of which the respondent's original assessment had to be accepted as correct. The review officer rejected that submission on the basis that as the injury occurred in 1989 the transitional provisions of the 1992 Act applied so far as assessment of relevant earnings was concerned. He also held that by virtue of s.138(2) the respondent had the power to make "adjustments to the calculations" referred to in subsection 1 of that section which includes the calculations of relevant earnings. The review officer concluded that the Corporation's decision was correct. It is against that decision which the appellant now appeals. Mr Carden again submitted that by virtue of s.41 of the 1992 Act the original decision of the respondent must stand. Alternatively, he submitted that if the 1982 Act applied, then the discretions provided by s.53 of that Act required a calculation which assessed a sum which fairly and reasonably represented the appellant's normal average weekly earnings at the time of the accident. He submitted that the appellant had filed his tax return for the year ended 31 May 1989 and properly declared his income for that year on which he had paid his tax and ACC levies. He submitted that the evidence demonstrated that in 1996 when the appellant required mortgage funds from his bank, the respondent had confirmed that he was in receipt of earnings related compensation of $719.70 per week which the appellant's bank accepted and upon which a substantial mortgage advance was made to him. Mr Carden submitted that the respondent should therefore be estopped from now 3 attempting to alter the assessment. He submitted further that the use of the word "adjustment" in s.138(2) did not permit a reassessment. Mr Carden submitted that while the respondent relied on the decision of the Court in McGhie (68/96), the facts of the two cases were distinguishable because McGhie had received earnings related compensation based on earnings declared by him which were found to be different after his income tax return had been completed. He submitted that in that case there had been a clear error while in this case there has been no error in that the figure assessed as relevant earnings was based on the actual return of income as filed and accepted by the Inland Revenue Department upon which the appellant paid tax and ACC levies. Ms Bright submitted that s.67A of the 1992 Act empowers the respondent at any time to review or amend a decision when it appears that the decision has been made in error or based on false or misleading information. She submitted that it was clear that as the appellant's accident occurred in September 1989 the transitional provisions of the 1992 Act applied whereby under s.138 the appellant was a person who immediately before 1 July 1992 was in receipt of compensation calculated under s.59 of the 1982 Act and that any adjustment of those calculations were therefore required to be made under the provisions of the 1982 Act. She submitted that this then brought s.53 into play for the purpose of calculation of the appellant's relevant earnings so that the situation was clearly akin to the situation in McGhie. Ms Bright submitted that when it was ascertained that the 1989 figure was inflated by the inclusion of the deferred income from 4 years previous it was encumbent on the respondent to make a reassessment and that the average income for the 4 years immediately prior to the accident properly represented the appellant's normal average weekly earnings. The Court has held on a number of occasions that the question of estoppel does not apply in the situation submitted by Mr Carden so I do not accept that submission. I do not accept Mr Carden's submission that the issue is determined by s.41 of the 1992 Act and that it is not capable of revision. I accept Ms Bright's submission that under the transitional provisions of the 1992 Act it was proper that when the nature of the substantial increase in the 1989 figure became evident the respondent should investigate the situation and should revise its decision under s.67A. The respondent's submission as I see it is that the appellant's total income for the 4 years immediately preceding the accident including the deferred livestock sale profits divided by 4, clearly gives effect to the discretions provided in s.53 to ascertain a figure which fairly and reasonably represents the appellant's average weekly earnings. This assessment also takes into account the fact that the steadily increasing income over the years in question gives credit for the appellant's personal exertions and also includes the benefit of the deferred livestock profits. 4 I consider therefore that the decision of the review officer was correct and that there is no reason why it should be disturbed. The appeal is dismissed DATED at WELLINGTON this 15 day of December 1998 A W Middleton District Court Judge Dea+4197.doc(rd)