Dalton v Accident Rehabilitation and Compensation Insurance Corporation

IN THE DISTRICT COURT HELD AT WELLINGTON Decision No. 2 25 / 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 DAVID ARTHUR LEASON DALTON of Taupaki Appellant (Appeal No. DCA 61/97) 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 from the appellant and from Ms F M Patterson, counsel for the respondent, with the request that I issue a decision on the papers The issue is whether the appellant who is a sharemilker is entitled to recover from the respondent compensation for replacement labour, loss of milk produce and penalties. The appeal arises out of an accident suffered by the appellant on 25 July 1996 when he spilt a hot acid mixture down his gumboots while cleaning a milk vat. The appellant received burns to his right lateral thigh and right lateral leg. On 1 August 1996 his general practitioner certified that the appellant suffered pain while squatting which was an essential position for him in his job and that this occurred if cows knocked his legs which happened frequently. The doctor notified the respondent that the appellant had been working for 7 days since the accident but that it was too much for him and sought consideration for payment for a part-time relief worker whom the appellant had been forced to hire. 2 In his earnings questionnaire form the appellant stated that the relief worker he had employed had inadvertently put milk from a cow which had been treated with penicillin into the vat with other milk with the result that he lost the earnings from his whole vat which had to be dumped in order to avoid a fine of $1,000. In a letter dated 24 October 1996 the appellant advised the respondent that the accident had occurred during the premium winter milk period and that he only had 3 months at that rate and 9 months at the normal milk price rate. He stated that he was penalised if he did not maintain his quota for the 3 months and his grades. He said that as a result of the relief worker's accident he lost two days of milk which had to be put down the drain to avoid a penalty of $1,000 and this also had the effect that his quota was then down for the period. On 30 October 1996 the respondent notified the appellant that the medical certificate confirmed that he had continued to work and this was also confirmed by his earnings questionnaire which indicated that his business continued to function and earned income after the accident. The letter noted that the respondent had no power to make a payment for a relief worker or loss of milk produce and penalties and his application for assistance was therefore declined. The appellant applied for a review of that decision. In his application for review the appellant stated that because of the nature of his business he was forced to continue working immediately after the accident although he was in extreme agony. It took him some time to obtain a relief worker and that he in fact had 10 days off when he was not working whilst the relief worker did the work. He said that he had to pay the relief worker in addition to losses incurred in having to tip out the contaminated milk. The appellant submitted a statement in writing to the review officer because the nature of his work precluded him attending a review hearing. In that statement he repeated the details of what had occurred and why he had employed a relief worker. In his decision the review officer recorded the nature of the accident and the effect on the appellant and the fact that he had had to employ a relief worker. The review officer noted that while the 1982 Act made it possible for the respondent to assist self- employed persons who suffered accidents to obtain replacement labour no similar provision or discretion is included in the 1992 Act. He noted that ss.40, 41 and 42 of the 1992 Act set out a strict code whereby the respondent has to assess pre-incapacity earnings on which weekly compensation during incapacity is based. He noted that in respect of a self-employed person, such as this appellant, his pre-incapacity earnings are assessed on the basis of his earnings for the financial year immediately preceding the period of incapacity. The review officer held that under the Accident Rehabilitation and Compensation (Earnings Definitions) Regulations 1992 a self- employed person's earnings are his taxable earned income for the financial year immediately preceding the incapacity. Accordingly he held that under the 1992 Act wages paid for replacement labour cannot be used as a basis of calculating weekly compensation. He also held that as a self-employed person liability for the first week of injury fell to be covered by the appellant himself. The review officer held that 3 having regard to the definition of a self-employed person's earnings under the 1992 Act the loss of the milk which was dumped could not be reimbursed. The review officer therefore held that the application for review had to be declined. The appellant lodged an appeal against that decision and has stated that he considers that it is unjust that his claim cannot be upheld as his losses were caused by the accident. He has provided a written submission from his accountant, Mr P G Foster, who raised the issue as to whether the decision of the review officer to confirm payment of a minimum wage for the three days of the second week following the accident. He submitted that the receipt should be much higher based on the appellant's gross receipts less expenses for the 10 month period ended 31 March 1996. He assessed an entitlement to a gross figure of $364 for the three days as being an equitable payment. He submitted that the use of the net taxable income for the preceding tax year could well mean that an applicant in the position of this appellant would be well out of pocket if his entitlement to weekly earnings was based on that figure. He took issue with the review officer's suggestion that the appellant might well consider paying the premium to entitle him in future to have his income based on the minimum self-employed level. However, that is not an issue before me but was merely a helpful decision made by the review officer. Ms Patterson submitted that the review officer had correctly applied the provisions of the Earnings Definitions in reaching the decision that he did. She submitted that the cost of replacement labour and loss of milk production and penalties are not losses which come within the definition of assessable income. They cannot therefore be considered as earnings other than as an employee. Under the Accident Rehabilitation and Compensation (Earnings Definitions) Regulations 1992 "earnings other than as an employee" are the subject of a definition which is: 'Earnings other than as an employee, in relation to any person and any income year, means the amount of assessable income (if any) derived by the person in the income year for the purposes of the Income Tax Act 1976 which -- (a) Is dependent on the personal exertions of the person; and b) If the person were to suffer any incapacity, the person would cease to derive as a consequence of such incapacity, - after deducting all amounts allowable as deductions to the person for the purposes of the Income Tax Act 1976 which are allowable by virtue of the person deriving the income referred to in this clause; but does not include any earnings as an employee." I agree with the review officer that the requirements of the 1992 Act are much stricter than those which applied under the 1982 Act. Under the 1992 Act the method for determining pre-incapacity earnings for a person in the position of this appellant who is a self-employed sharemilker are fixed by reference to the earnings returned in 4 the most recent income year. Accordingly for this appellant the income returned in the income year which ended on 31 March 1996 must be the figure upon which his entitlement to weekly earnings is assessed. Notwithstanding Mr Foster's submission, even if in that income year the appellant had only been earning for a period less than 12 months the High Court has held that the figure as returned for tax purposes in that year represents the earnings for the whole period of 12 months and not for any shorter period. As can be seen from the definition of earnings other than as an "employee" the losses claimed by the appellant for a relief worker and the loss of milk production caused by him are not losses which come within that definition and therefore the appellant is not entitled to the claim for those losses. I agree that the review officer correctly applied the law to the facts of this appellant's case and the appeal is dismissed. DATED at WELLINGTON this loth day of November 1997 A W Middleton District Court Judge de61-97.doc(rd)