Saunders v Accident Rehabilitation and Compensation Insurance Corporation

IN THE DISTRICT COURT HELD AT WELLINGTON Decision No. 115 /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 BERNARD DENIS SAUNDERS of Whangarei Appellant (Appeal No. DCA 15/98) AND ACCIDENT REHABILITATION AND COMPENSATION INSURANCE CORPORATION a body corporate duly constituted under the provisions of the said Act Respondent DECISION OF JUDGE A W MIDDLETON ON THE PAPERS The issue in this appeal is whether the appellant should be required to refund an overpayment of an independence allowance amounting to $1,082.28. The appellant suffered a medical misadventure in December 1982 as a result of which he lost his left leg. In March 1987 he was assessed under s.78 of the 1982 Act as having suffered a permanent disability of 45% for which he received the appropriate lump sum award. In November 1993 a report from the appellant's orthopaedic surgeon indicated a deterioration in his permanent disability and requested a reassessment of his lump sum award. On 3 December 1993 the appellant was notified by the respondent that he was not entitled to further lump sum awards for deterioration as the 1982 Act had been repealed by the 1992 Act and he had not made the appropriate election by the specified date. He was then invited to apply for an independence allowance. The assessment for the independence allowance was carried out on 6 December 1993 when his disability was assessed at 29%. The respondent noted that the appellant had previously received a lump sum award of $3,150 which it equated to 2 representing an 18.53% impairment. This figure was deducted from the assessed disability of 29% and the appellant was paid an independence allowance based on 10.47% from 16 December 1993. In August 1995 a reassessment was undertaken and the appellant's disability was assessed at 100% from which the respondent again deducted 18.53% as a result of which the appellant was notified that he was entitled to an independence allowance at the rate of 81.5% which equated to $24.65 per week. A further assessment was undertaken on 13 March 1997 when his permanent disability was assessed at 49%. The respondent then realised that the deduction of 18.53% was incorrect and should have been the 45% originally assessed in respect of the award under s.78 of the 1982 Act. When that figure was deducted from the 49% assessed disability, the result of 4% permanent disability did not come within the threshold figure so that the appellant was not entitled to receive any independence allowance. On 8 January 1997 the respondent then notified the appellant the result of its calculation as a result of which he had been overpaid $1,082.28 which the respondent required to be repaid. The appellant applied for a review of that decision. The review officer accepted that the appellant had not intentionally contributed to the overpayment and had received the money in good faith but did not consider that it would be inequitable to require repayment of the overpayment. It is against that decision which the appellant now appeals. The appellant complains that in recent times he has had some difficulties with staff in the respondent's office following years of good service. He submitted that his financial position is such that he has an excess of expenditure over income amounting to $154.94 which would make it inequitable to require him to repay the overpayment. He submitted that there has been a drastic change in his financial circumstances brought about by a continuing dispute in respect of the operations of a forestry block in which he has an interest. It appears that he has been involved in legal proceedings with the local district council which he claims has illegally installed oxidation ponds on his land with the result that he has incurred substantial legal fees in trying to remedy the position. In order to meet his expenses he has drastically reduced his capital reserves which he had previously set aside to provide retirement income. The appellant has income from National Superannuateon amounting to $144 per week and his only other income from investments amounts to $70 per week. His expenditure exceeds his income by $154.95 per week and he has an anticipated legal fee contingency of $45,000. While he has a surplus of assets over liabilities of $268,000 this is principally involved in the forestry block which is the subject of the dispute with the local council and while that situation persists the property is not readily disposable. The respondent submits that the decision of the review officer should be upheld in that while it is accepted that the appellant did not contribute to the establishment of the debt and had received the funds in good faith his financial position is not such that it would be inequitable to require repayment. 3 It is interesting to note that a memorandum on the file prepared on 21 August 1997, and prior to the hearing of the review on 18 November 1997, after confirming that the error had been detected in 1997 stated: "Mr Saunders did not advise ACC that he had received lump sum compensation previously when he completed the application for review. Therefore, Mr Saunders did contribute to the debt and for this reason ACC has doubts whether Mr Saunders did not intentionally contribute to the debt." While this issue was not taken up by the review officer she did in fact refer to that memorandum in her decision because the appellant had complained about it in making his submissions. Clearly, the statement is incorrect because the only application for an independence allowance assessment which I can find on the file was the appellant's original application which appears to have been lodged on 10 December 1993 and which prompted the first assessment of 29% from which the respondent incorrectly deducted 18.53%. In that application under Question 9 which asks "have you ever received lump sums from ACC?" and the answer is "yes". That appears to thereafter have been acknowledged because the respondent continued to reduce the quantum of the entitlement but by the incorrect percentage. It was not until January 1997 that the respondent corrected its mistake and called for a refund of the overpayment. It is clear therefore that from the very beginning the respondent was aware of the s.78 award but it failed to check its file before issuing its first decision on the independence allowance. The issue is governed by s.77(2) of the Accident Rehabilitation and Compensation Insurance Act 1992 which states: "(2) 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". While the respondent has referred me to a number of decisions of the Court relating to this section, each case must be dealt with on its own particular facts. It is accepted that the appellant in this case did not contribute to the overpayment and that he did receive funds in good faith. At that time he had no recollection of the quantity of the s.78 assessment. His statement of assets and liabilities indicate that on paper he has a quite substantial net worth. The big difficulty for him as he has submitted is that his legal problems with the district council in relation to his claim against it has resulted in considerable expenditure on fees and the anticipation of further costs in this direction. At the same time this ties up any ability he might have to raise money on the security or sale of the disputed property. Apart from that his only income is the National Suppuration, plus a small account of income which amounts to $70 per week. On top of that he has rates and interest to pay, together with the maintenance of vehicles and travel. His excess of expenditure over income is $154.95. In 4 examining the expenditure there does not appear to be anything unusual in it, having regard to his assets. While the overpayment was incurred over a period of some 4 years and does not appear on the face of it to be a very large amount, the appellant accepted it as being his entitlement and has used it for his normal living expenses. While that by itself does not constitute a hardship I consider that having regard to his present financial position and commitments it would now be inequitable to call on him to repay the overpayment. The appeal is allowed and the overpayment will be cancelled. DATED at WELLINGTON this 25th day of may 1998 bwunaderbin A W Middleton District Court Judge de1598.doc(rd)