Christchurch City Council v Accident Rehabilitation and Compensation Insurance Corporation

IN THE DISTRICT COURT HELD AT WELLINGTON Decision No. 210/97 UNDER The Accident Rehabilitation and Compensation Insurance Act 1992 AND IN THE MATTER of an appeal pursuant to section 91 of the Act BETWEEN CHRISTCHURCH CITY COUNCIL Appellant (Appeal No. DCA 3/97) 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 I have received submissions by Mr J Greene, advocate for the appellant and from Ms P J Zumbach with the request that I issue a decision on the papers. The issue is whether the Review Officer was correct to uphold the respondent's primary decision to classify the appellant's industry classification under number 41210 - Road and Bridge Construction. The facts which give rise to the appeal are that the appellant created a Local Authority Trading Enterprise (LATE) to manufacture cut-back bitumen, hot mix and emulsion mixes as a separate trading unit. It requested the respondent to determine the correct industrial classification for the unit. In a decision dated 2 July 1996, the respondent determined that the premium classification for the LATE was number 41210 - Hot Mix Manufacturing with a premium rate per $100 of liable earnings of $5.68. The appellant applied for a review of that decision because it considered that the correct classification for the LATE should have been number 25200 - Petroleum and Coal Product Manufacturing, not elsewhere classified, with a premium rate per $100 of liable earnings of $2.23. Following a review hearing the Review Officer confirmed the respondent's primary decision and it is against that decision which the appellant now appeals. In support of the appeal the appellant has provided an affidavit from Mr Richard English, the General Manager of the LATE. He is the holder of various civil engineering degrees and has had 29 years experience in general civil engineering and 8 years of specific involvement in road surfacing and construction. He has told the Court that the road surfacing industry has two major components, being paving and chipsealing. Both areas of activity are split into manufacture and application or laying. In the chipsealing process, raw bitumen is transported from local port facilities to the manufacturing plant by supplier operated tankers. The material is transferred into the manufacturer's facility for short-term storage as required and transferred to smaller tanks where it is blended with a number of chemicals and raised to a temperature suitable for construction site application. This liquid is known as 'Cut- Back Bitumen'. Alternatively, the raw bitumen is fed into a high speed mixing pump where it is blended with water and other chemicals to produce a suspension of fine bitumen particles in water, known as 'Emulsion' or more correctly, 'Bitumen Emulsion'. The LATE does not yet undertake that operation. When completed, the material is pumped into a customer tanker for transfer to the road site. The products are sprayed onto the road surface by the customer prior to the application of an overlay of stone chips. Mr English said that in the paving process, graded aggregates are passed through a drier drum to remove moisture and to increase the material to a temperature suitable for mixing. Pre-determined quantities of these materials are batched under computer control into a mixer bowl where hot bitumen is added. The resultant aggregate and bitumen is known as 'Asphaltic Concrete', 'AC' or 'Hot Mix'. This product is stored in heated bins prior to dispatch to customer trucks. The hot mix is transported to site and is laid either via a paving machine or by hand prior to compaction by heavy rolling equipment. Mr English said that the LATE's plant manufactures cut-back bitumen, hot mix and emulsion mixes. He said that the plant has no construction staff and all the products produced by it are on-sold to third parties for construction and maintenance site use. The function of the LATE is only a bituminous products manufacturing operation. In evidence before the Review Officer the respondent had stated that since 1996 the respondent's classification system was based on the Australian and New Zealand Standard Industrial Classification System (ANZIC). That system provides various divisions which are used by the respondent in determining classifications for various industries. The Review Officer concluded that having regard to the requirements of section 103 of the Act and the appellant's industry "activity" the appellant's request to be classified under unit 25200 was not correct and the appropriate activity required classification under class 4121. ANZIC class 2520 states: "Petroleum and Coal Product Manufacturing n.e.c. Petroleum and Coal Product Manufacturing n.e.c. This class consists of units mainly engaged in manufacturing petroleum or coal products n.e.c., including bituminous surfacing materials (except hot-mix bituminous paving), bitumen or tar treated papers, felts or foils bituminous mastics or adhesives, or refined tar. This class also includes units mainly engaged in the recovery of lubricating oil or grease from used petroleum waste products. Exclusions/ References Units mainly engaged in manufacturing or laying hot-mix bitumen paving are included in Class 4121 Road and Bridge Construction. Primary Activities Adhesive, bituminous. mfg Char mifg (except bone char) Paper or paperboard, bituminized, Coal product mfg n.e.c. mfg Emulsion, bituminous, mfg" The classification 4121 states: 'Non-Building Construction Road and Bridge Construction This class consists of units mainly engaged in the construction or general repair of roads, bridges, aerodrome runways or parking lots, or in organising or managing their construction. The quarrying of earth, soil or filling or other construction materials carried out in conjunction with road or bridge construction by the same unit is included in this class. Exclusions/ References Units mainly engaged in (a) manufacturing bituminous surfacing materials (except hot-mix bituminous paving) are included in Class 2520 Petroleum and Coal Product Mfg n.e.c.; (b) the construction of tunnels for any purpose are included in Class 4122 Non-Building Construction n.e.c.; and (c) providing special trade repair services, or in undertaking special trade construction of component parts of roads or bridges, e.g. in construction of kerbs or gutters only or in installing electrical wiring for traffic lights, are generally included in the appropriate classes in Subdivision 42 Construction Trade Services. Primary Activities Aerodrome runway construction Repair or maintenance of roads or Asphalt surfacing or bridges Bridges construction (incl. Road construction or sealing construction from prefabricated Road sub-base or fill quarrying components) (in conjunction with road Elevated highways construction construction) Overpasses construction Viaducts construction Parking lot construction except buildings)" Mr Greene submitted: 1. That the Review Officer was wrong to hold that the production of hot mix was a task ancillary to road and bridge construction which brought the "activity" under classification unit 41210. That the LATE manufactures only cut-back bitumen, hot mix and emulsion mixes. 2. That the ANZSIC classifications clearly differentiate between the manufacture of a product and its use in construction. That the LATE is only involved in manufacture and has no involvement in construction which more correctly brings it within the category Petroleum and Coal Product Manufacturing not elsewhere classified, being 2520 and shown as 25200 in the Schedule to the Regulations. Although there is an exclusion for units mainly engaged in manufacturing or laying hot mix bitumen (which are included in class 4121 - Road and Bridge Construction) the LATE is not mainly engaged in manufacturing or laying hot mix for paving rather it only manufactures such products so that the exclusion does not apply. Ms Zumbach submitted: 1. That the respondent is required to classify the LATE in the classification unit which must accurately describes its employer's activities which is the manufacturer of cut-back bitumen, hot mix and emulsion mixes. 2. That the appropriate classification is therefore class 41210 - Road and Bridge Construction on the basis provided by regulation 6(3) that where an employer is engaged in two or more distinct and independent activities and does not maintain separate records, its employees are to be classified for the activity for which the highest rate of premium is prescribed in the Regulations. That class is 41210, being the highest rate of premium of the three products the appellant manufactures. 3. That the respondent's decision that the most accurate classification is class 41210 is confirmed by a close reading of class 25200 which provides that it consists of units "mainly engaged in manufacturing petroleum and coal products n.e.c., including bituminous surfacing materials". However, the description excludes "hot mix bituminous paving" and then goes on to provide in the exclusions/ references that units mainly engaged in manufacturing or laying hot mix paving are included in class 4121, being Road and Bridge Construction. Pursuant to section 103 of the Act the respondent has an obligation to classify industries into classes as defined by the Regulations so that the necessary premiums can be set. Regulation 2 of the Employment Premiums Regulations defines: "... the industry, trade, business, profession or undertaking of an employer or a person who has earnings other than as an employee; and, for that purpose, 5 functions which are an ancillary or subservient to an activity (including, but not without limitation, administration, marketing and distribution, technical support. maintenance, product development or other like functions) shall comprise part of that activity and shall form a separate activity." I have considered the ANZSIC classifications and find it difficult to understand the provision in classification 2520 which excludes "hot mix bitumen paving". The main purpose of the classification is to cover "units mainly engaged in manufacturing Petroleum or Coal Products n.e.c including bituminous surfacing materials" but then goes on to excludes "hot mix bituminous paving". It seems to me that emulsion mix manufactured by the appellant falls within classification 2520, were it not for the specific exception. However, on the evidence before the Court, the exclusion appears illogical when one considers that the ingredients and nature of the product are all so similar. I agree with Mr English's statement that the ANZSIC classifications clearly differentiate between "manufacture" and "use" so that it is anomalous that the manufacture of hot mix is not specifically included in 2520. I appreciate that the purpose behind the classifications is that industries which have the higher probability for accidents must pay higher premiums. Hence the classification 4121 which includes work of much heavier and perhaps more accident prone activities than the mere manufacture of bituminous mixes. The evidence is quite clear that this appellant simply manufactures asphaltic surfacing materials which are then sold out to independent contractors. It has no involvement with the actual paving or laying of the materials on roads, bridges or in other places. Accordingly, I consider that the decision of the Review Officer and the respondent was wrong. I consider that the correct classification under the Regulations should 25200, being Petroleum and Coal Product Manufacturing (not elsewhere classified). The appellant's advocate is entitled to $700 contribution towards the cost of the appeal. DATED at WELLINGTON this 29th day of OCTOBER 1997 A W Middleton District Court Judge