McIntyre v Accident Compensation Corporation

IN THE DISTRICT COURT HELD AT WELLINGTON Decision No. 294 /2000 UNDER The Accident Insurance Act 1998 AND IN THE MATTER of an appeal pursuant to section 152 of the Act BETWEEN DEAN ANDREW MCINTYRE of Timaru Appellant (Appeal No. Al 116/2000) AND ACCIDENT COMPENSATION CORPORATION a body corporate duly constituted under the provisions of the said Act Respondent HEARING at WELLINGTON on the 29th day of September 2000 APPEARANCES/COUNSEL J M Miller for appellant M M Ahern for respondent RESERVED JUDGMENT OF JUDGE A W MIDDLETON The issue in this appeal is whether the respondent was correct to abate the appellant's weekly compensation following receipt of holiday pay at the end of the freezing works season. The facts which give rise to the appeal are that the appellant was employed as a Freezing Worker by Alliance Group Limited. He suffered a soft tissue injury to his right ankle while playing rugby on 3 July 1999 as a result of which he was incapacitated from his employment. His claim for cover was accepted by the respondent which paid weekly earnings from 11 June 1999 until 17 October 1999. During that period the freezing works season ended and the respondent was paid holiday pay of $2,253.06. The respondent then informed the appellant that his weekly compensation would be abated because of that payment. The respondent assessed that the holiday pay equated to 2.5 weeks of pre-accident earnings and abated his weekly earnings accordingly. The appellant applied for a review of that decision. 2 In his decision, the Review Officer concluded that the holiday pay was "earnings for the purposes of the Act" and that the respondent was therefore correct to abate the appellant's weekly compensation. It is against that decision which the appellant now appeals. Mr Miller conceded that holiday pay is "earnings" but submitted that on the facts of this case, the holiday pay should not have been abated. Mr Miller submitted that clause 23(6) of Schedule 1 of the Accident Insurance Act 1998 provides that the insurer must have regard to the period to which the payment relates, its amount, the nature of the payment and any other factors considered relevant when assessing the weekly rate which the payment is received. He submitted that the respondent should have taken into account that the holiday pay was accrued on a daily basis over seven months and it was therefore unreasonable to consider that it constituted 21/2 weeks pay. Mr Miller submitted further that the definition of "earnings" provided in clause 23 are for the purposes of making the calculation pursuant to clause 24. He submitted that if the appellant's holiday pay does not fit within the provisions of clause 24 then there is no need to consider clause 23. He submitted that the pivotal words provided in clause 24 refer to the fact that the insurer may reduce the amount of weekly compensation paid by a certain amount "for every $1 of earnings derived during the period of incapacity in excess of $" Mr Miller's principal submission is that the holiday pay only accrued on a daily basis as he was working and should have been included in the assessment of his weekly compensation. Ms Ahern submitted that the payment made was made in respect of termination of employment and was received by the appellant during his period of incapacity. She submitted that under the 1992 Act that sum would be "deemed to be being derived" as a weekly sum at the rate of the appellant's assessed weekly earnings prior to the incapacity and the compensation abated accordingly. As in ARCIC v Bernstone, a decision of Justice Gallen issued on 29 November 1996 under AP 70/95, Ms Ahern submitted that the phrase "deemed to be being derived" describes the notional receipt in weekly instalments of a sum that in reality has been paid and received in one sum. She submitted that "derived" has the same meaning in the context of the Accident Insurance Act 1998 as it does under the 1992 Act and thus means "received" or "paid". She submitted that the earnings refer to in clause 24(1) are those paid, and determined in clause 23(6). While Justice Gallen in Bernstone reluctantly concluded that holiday pay paid in similar circumstances to this case could be abated pursuant section 47(1) of the 1992 legislature, a result which the Judge considered to be unfair, the position under the 1998 legislature provides a different wording in clause 24 of Schedule 1. The Court must assume that the legislature by the deliberate use of the wording intended a different result. The evidence given at the review hearing, supported by a sample wage slip, showed that the appellant was paid on an hourly rate and wages were paid on a weekly basis. It is clear from the summary on the wage dockets that holiday pay was being deducted and that on each wage slip the accrued amount of holiday pay then available was stated. 3 I agree with Mr Miller's submission that having regard to section 21(2) of the Holidays Act 1981 the employer is required to pay the holiday pay calculated over the period of employment "forthwith" on termination. I agree with Mr Miller's submission that that reinforces his argument that holiday pay accrues over the period of employment and not the period of incapacity. I consider that the legislature must have intended something different when it incorporated the words "earnings derived during the period of incapacity" in clause 24 of Schedule 1 of the Act. Clause 24 of Schedule 1 connotes a different concept to that provided by section 47(1) of the 1992 Act which states: " 47. Abatement of compensation for loss of earnings or loss of potential earning capacity---(1) In determining the weekly compensation for loss of earnings or loss of potential earning capacity payable in respect of the incapacity of a person, the weekly earnings of the person shall be reduced by 30 cents for every $1 of earnings in excess of $50 a week but not in excess of $80 a week and by 70 cents for every $1 of earnings in excess of $80 a week." (my emphasis) The 1992 section makes no reference to "earnings derived during the period of incapacity" etc, as stated in clause 24. The respondent has submitted that there is really no difference but I consider that there is. There is support for that belief in the decisions of the Court of Appeal in Egmont Co-operative Dairy Limited (in liquidation) v CIR [1996] 2 NZLR page 419. In the judgment delivered by Richardson P at page 416, reference is made to section 38(2) of the Income Tax Act which states: (2) Subject to this Act, income tax shall be payable by every person on all income derived by him during the year for which the tax is payable." The Learned President then said: "The legislation is thus specifically directed to "income derived" by the taxpayer during the income year and, in relation to business income, to "profits or gains derived" from any business (s 65(2)(a)). The expression 'derived" is not defined. It means flowing, springing, or emanating from and is synonymous with the English tax expression "arising from or accruing" (Commissioner of Inland Revenue v Farmers' Trading Co Ltd [1982] 1 NZLR 449, 457)." A similar issue was considered by the Exchequer Court of Canada in Kemp v Minister of National Revenue [1948] 1 DLR 65 at page 71. The President of the Court said: "In a taxing Act words must, generally speaking, be given their plain and ordinary meaning, and according to such meaning, the word "derived" covers a wider field than the word "received", and when applied to the word "income" it connotes the source or origin of such income rather than its immediate receipt." 4 I do not accept the respondent's submission that the receipt of the holiday pay after the cessation of employment but during the period of incapacity amounted to income derived during the period of incapacity. I consider that the plain meaning of the words is that it was derived as a result of his period of employment prior to his incapacity. I agree with Mr Miller's submission that the result of the respondent's decision is that this appellant has been penalised twice by receipt of the holiday pay after the period of employment had ceased but while he was still incapacitated. It is quite clear from the payslips that at all times the quantum of holiday pay was being recorded as being derived during the period of employment but payment could not be made until the employment ceased. The appropriate course to provide justice to this appellant should have been that when the payment was made the respondent should have reassessed the entitlement to weekly income by including the amount of the holiday pay in the appellant's assessment of relevant earnings. I consider that seasonal workers do suffer a serious injustice if the respondent's decision is correct. Workers such as this appellant are required to sign off at the end of the season on the understanding that employment will be available in the next season. For that reason, I consider that because the holiday payment is not paid immediately, the pay already received plus all holiday pay constitutes the earnings derived during the working season. The holiday pay when received does not constitute earnings derived during the period of incapacity. The only issue before me is whether the appellant derived income during the period of incapacity. For the reasons I have given he did not. The appeal is allowed. There will be costs to the appellant of $900. DATED at WELLINGTON this Is+ day of November 2000 A W Middleton District Court Judge ai116-2000.doc (nr)