Browne v Accident Rehabilitation and Compensation Insurance Corporation

IN THE DISTRICT COURT HELD AT WELLINGTON Decision No. 62 /99 UNDER The Accident Rehabilitation and Compensation Insurance Act 1992 AND IN THE MATTER of an appeal pursuant to section 91 of the Act BETWEEN BRIAN ROBERT BROWNE of Kaitaia Appellant (Appeal No. DCA 235/95) 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 18th day of February 1999 APPEARANCE/COUNSEL K Reid for appellant D Fotiades for respondent RESERVED JUDGMENT OF JUDGE A W MIDDLETON The issue in this appeal is whether the appellant is entitled to remission of the debt of $25,574.77 which represents an overpayment of earnings related compensation. The appellant and his wife were involved in a company known as Houhora Avocados Limited and in a partnership known as Houhora Avocado Partnership 2 On 22 June 1989, as a result of a medical misadventure, the appellant received a serious disabling leg injury. The appellant was granted cover under the 1982 Act. The appellant was granted earnings related compensation based on the certificate of earnings supplied by the Inland Revenue Department. The appellant was fully incapacitated until March 1990 when he was declared partially fit for work on the basis that he was unable to carry out one third of his work. As a result the respondent made a notional assumption of post accident earnings and reduced his earnings related compensation accordingly. Payments continued to be made on that basis until 1 October 1993 when payments were ceased following receipt by the respondent of a certificate of earnings by the Inland Revenue Department which disclosed that the appellant had been in receipt of earnings throughout the whole period which equalled or exceeded his pre-accident earnings. The respondent then notified the appellant that the payment of earnings related compensation would cease and raised a debt for the overpayment. While the appellant submitted, and there appears to be no argument on that issue, he and his wife had been regular attendees at the respondent's local office where they were known and had advised the staff of the fact that he had improved to the stage where he could under one third of the work which he had previously undertaken. It appears that it was after the local office of the respondent closed and the records transferred to Whangarei that the issue of overpayment arose. There appears to be no argument that throughout the period from the time the cover was accepted the appellant was paid the same amount as had been paid to him prior to his injury. He then paid his wife half the amount in accordance with the partnership arrangement which existed prior to his injury. it does not appear that the appellant ever disclosed the continuation of his arrangement to the respondent's local office. The file discloses that the respondent may have been somewhat lax in obtaining details of post accident earnings but it does disclose that on 11 August 1992 the respondent notified the appellant that as a result of changes in the Accident Compensation scheme commencing from 1 July 1992, weekly earnings would be adjusted "based for any income you receive for working. This income is called "excess earnings". Excess earnings will be deducted from you weekly earnings." The letter then set out the method of calculation and later in the letter it was stated " the employer you are currently working for will need to continue to forward to us details of your weekly earnings." At the same time the respondent issued to the appellant an assessment of his earnings related compensation (form C62) dated 13 August 1992 which showed an abatement calculation based on post accident earnings of $90.74 being the notional figure of one third of pre-accident earnings. When the certification was received from Inland Revenue Department that the appellant had in fact continued to receive the same pre-accident earnings, post accident the debt was raised. The appellant requested remission of the debt which was declined and he applied for a review of that decision. 3 The Review Officer referred to the provisions of section 77 of the Act and held that . the appellant was not entitled to post accident earnings related compensation because he had continued to receive the same earnings as pre-accident. While it had been submitted to the Review Officer that the appellant and his wife had been required to employ additional labour, he held that the cost of that work was borne by the partnership and this did not involve a reduction in remuneration paid to the appellant. The Review Officer held that in the circumstances the appellant had not altered his position to the extent that he could not make arrangements to repay the debt. He held that the decision of the respondent should upheld. It is against that decision which the appellant now appeals. Mr Reid submitted that because of the nature of the partnership structure, the remuneration received by the appellant and his wife was "quite low". He submitted that the appellant's wife had had to assume the bulk of the appellant's responsibilities in running the orchard while he was incapacitated. Mr Reid also submitted that the appellant had not intentionally contributed to the error and had received the payments of compensation in good faith and had obviously altered his position. He submitted that the overpayment came about by a combination of administrative oversight in the respondent's local office and its failure to ascertain from the employer the appellant's correct status and also to follow up the position with the Inland Revenue Department. Mr Reid submitted further that at no time was there any element of fraud or subterfuge and which was demonstrated by the fact that the appellant and his wife had been regular attendees at the local office of the respondent to keep them informed of his position. After the appeal had been lodged the appellant submitted a full set of accounts from his Accountant together with further medical reports. The issue is whether or not the respondent was correct to require full recovery of the overpayment. The issue is governed by section 77 of the Act which states: "77. Recovery of overpayments and unpaid premiums by Corporation--- (1) If any person receives any sum of money from the Corporation-- (a) Which is in excess of the amount to which he or she is entitled under this Act; or (b) To which he or she is not entitled-- the sum of money shall, except to the extent that it is recovered under subsection (3) of this section, be a debt due to the Corporation and may be recovered by way of proceedings or deducted from any amount thereafter payable to that person (whether or not in respect of the same personal injury). (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." The matter which concerns me is that while the appellant and his wife kept the local office of the respondent informed of the manner in which they were carrying out 4 their duties at the orchard, they failed to disclose the fact that the appellant continued to receive the same remuneration as he had prior to the injury. Another concern is the earnings certificate completed by the employer and dated 5 August 1989. That certificate requests information regarding the appellant's earnings for the four weeks immediately preceding the injury. It then goes on to pose as question number 8 "Since the accident or incapacity what has been his capacity to work in your employment?" The answer given was "Unable to work at all from 22/6/89". The answer to the question "Able to do selected or partial work from" was "N/A". The question "Do you consider any factors other than the injury have affected his capacity to work?" the answer was "No". Question 11(a) was "Are you making (or do you intend to make) any type of taxable payment or allowance to the injured person during his incapacity which does not relate to work done. Such as First Week Compensation continued wages free house, sick leave etc?" The answer to that question is "no". I take it from that certificate that the appellant and the partnership must have been fully aware that earnings related compensation being paid to him was in lieu of the income he would otherwise have received from the partnership had he not been incapacitated. That was the whole purpose of the questions which were required to be answered. While various changes of partnership occurred during the period of incapacity, which resulted in some refinancing to be undertaken in order to pay out the retiring partner, I do not consider that that has a bearing on the final result. It is clear from the accounts now before the Court that the business is profitable and going well. I consider that the appellant failed to provide the necessary details of his income following the accident which amounted to an intentional contribution to the overpayment of compensation. That finding is substantiated further by the letter of 11 August 1992 advising the appellant of the new regime regarding abatement together with the assessment of earnings related compensation of 13 August 1992 which, at that time, should have acted as a very sharp warning to the appellant that he was being paid on the basis that he was only earning one third of his pre-accident earnings. A further requirement of section 77 is whether or not the appellant has so altered his position in reliance on the validity of the payments that it would be inequitable to require repayment. That issue was the subject of a decision by Judge Lovell-Smith in Satherly v ARCIC (150/96) who considered there were parallels between section 77(2) and section 94B of the Judicature Act 1908 which states: "Relief whether under s.94A of this Act or in equity or otherwise in respect of any payment made under mistake, whether of fact or law, shall be denied wholly or in part if the person from whom the relief is sought received the payment in good faith and has so altered his position in reliance on the validity of the payment, that in the opinion of the Court, having regard to all possible implications in respect of other persons, it is inequitable to grant relief, or to grant relief in full, as the case may be." 5 In her decision Judge Lovell-Smith cited with approval a passage from the decision . of Justice Hardie-Boys in Hollidge v Bank of New Zealand, a decision issued in the High Court at Nelson under M1840 on 29 March 1982. Justice Hardie-Boys 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." While the appellant claims that additional staff was employed that of itself is not a ground for relief because the cost of that assistance was borne by the partnership. In addition, the appellant was able to use the overpayments to meet his day to day needs without having to resort to the funds of the business. I agree with the respondent's submission that "on a broad view it appears that the overpayment either directly or indirectly preserved or enhanced his capital." I consider that while the appellant and his wife were going through a difficult period with the partnership in the time he was incapacitated, the receipt of the additional compensation did provide money on a day to day basis which permitted the business to continue. It is now evident from the accounts which have been filed that while the net assets of the partnership as at 31 March 1993 were $45,001 by 31 march 1998 they amounted to $620,724. That is a significant growth in a short period and that the payment of weekly compensation to the respondent must have contributed in some material way. I consider that to a significant extent the partnership came through a difficult period because the appellant accepted the weekly compensation which enabled him to meet his daily living expenses. In the circumstances, I do not consider that the appellant has satisfied the onus on him to demonstrate that the repayment of the debt would outweigh the advantages received by him as a result of the overpayment. The appeal is dismissed. DATED at WELLINGTON this 15th day of March 1999 A W Middleton District Court Judge dca235-95.doc (nr)