Estate of Neal v Accident Compensation Corporation

IN THE DISTRICT COURT AT WELLINGTON DECISION NO. 25 /2008 UNDER The Injury Prevention, Rehabilitation and Compensation Act 2001 IN THE MATTER OF an appeal pursuant to section 149 of the Act (Appeal No. AI 567/05) BETWEEN ESTATE OF P T NEAL Appellant AND ACCIDENT COMPENSATION CORPORATION Respondent Counsel: Ms C Ross and Mr J Miller for appellant Mr A D Barnett for respondent Judgment: 30 January 2008 RESERVED JUDGMENT OF JUDGE D A ONGLEY [1] This is a supplementary judgment to deal with a point that was not fully argued at the hearing of this appeal. The main judgment is Estate of Neal (117/07) in which I followed Wardle v ACC (High Court, Wellington, AP 134/02) and decided that the Corporation was not liable for interest on backdated weekly compensation paid within one month after receiving all necessary information to calculate and make the payment, and that necessary information for the total backdated payment included ascertaining the amount of any excess benefit payment which the Corporation was liable to refund to WINZ. I rejected an argument that the WINZ information was not necessary information in respect of periods for which the claimant had not received an income tested benefit. [2] I followed ACC v Knight (High Court, Christchurch CIV 2005-485-1582, 9 November 2005) in which Randerson J accepted that if an enquiry established that Estate Of P T Neal V ACCIDENT COMPENSATION CORPORATION DC WN DECISION NO. /2008 [30 January 2008] there was no relevant post-accident income, there was to be no retrospective deeming that the insurer had all the information at an earlier date. It follows that an answer to the insurer's reasonable enquiry concerning post-accident income or excess benefit payment is necessary information, and that is so whether or not the answer discloses income or excess benefit payment that affects the calculation of the payment to the claimant for backdated weekly compensation. [3] These conclusions were reached on the basis that the insurer was liable to refund any excess benefit payment that might be established. I reserved leave for the parties to file further submissions on an argument advanced by Ms Ross for the appellant addressed to s.373(4) of the 1998 Act. The section is set out here in full: 373 Relationship with social security benefits: reimbursement by insurers (Repealed (1) This section applies where a person - (a) Receives a payment of an income-tested benefit under the Social Security Act 1964 in respect of a period; and (b) Establishes a claim to an entitlement from an insurer (including the manager) in respect of all or part of the same period. (2) An excess benefit payment is treated as having been paid in respect of that entitlement. (3) An excess benefit payment is the part of the benefit payment (up to the amount of the entitlement) that is in excess of the amount of benefit properly payable, having regard to the entitlement under this Act (4) The insurer must refund the excess benefit payment to the department responsible for the administration of the Social Security Act 1964 - (a) If the insurer knows that this section applies; or (b) If requested to do so by the department. (5) For the purposes of this section, an excess benefit payment includes a payment of any part of a married rate of benefit that is paid to the spouse of the person who established the claim to the benefit. [4] Ms Ross drew attention to subsection 4(a) and submitted that until the insurer knew that an excess benefit payment refund was required, it did not have an obligation to make the payment. She submitted that meanwhile the insurer had no statutory obligation and the position was similar to that decided in cases under s 78 of the Accident Rehabilitation and Compensation Insurance Act 1992 where the excess benefit payment was not regarded as necessary information to enable the Corporation to make the payment, because the refund of benefit was discretionary and did not have to be taken into account. By similar reasoning, until the insurer knew that the refund section applied, it had no statutory obligation and could make the backdated payment to the claimant without deducting a WINZ refund. [5] Mr Barnett for the respondent submitted that s 101 and s 373 had different purposes that should not be confused. Section 101 of the 1998 Act stated: 101 Payment of interest when insurer makes late payment of weekly compensation (1) The insurer is liable to pay interest on any payment of weekly compensation to which the insured is entitled, if the insurer has not made the payment within 1 month after the insurer has received all information necessary to enable the insurer to calculate and make the payment. (2) The insurer is liable to pay the interest - (a) At the rate for the time being prescribed by, or for the purposes of, section 87 of the Judicature Act 1908; and (b) From the date on which payment should have been made to the date on which it is made. [6] In this case, the important exercise under s 101 is to identify what information was necessary. Mr Barnett submitted that s 363(4) was self-evidently a provision to protect the insurer from liability to the benefit agency in cases where it did not have notice, or did not know that a benefit had been paid during relevant periods. The dominant provision was s 373(2) which related the excess benefit payments to the weekly compensation entitlement. Under subs (4) the insurer was liable to refund the payment, but was protected where it did not have knowledge. Mr Barnett submitted that s 373(4) stands apart from s 373(2) and is not relevant to s 101 considerations. He submitted that, because an excess benefit payment is to be treated in all circumstances as weekly compensation it is necessary information for calculation, and it affects the operation of s 101. [7] Mr Miller filed supplementary submissions in support of the appellant's argument first raised at the hearing. He submitted that the point was not considered in Wardle and that this Court is not bound by authority. He submitted that, until the WINZ information is received, the insurer does not know that the section applies. In the present case no benefit was paid from 1979 to 1986. Once that information was received then the insurer knew that the section did not apply and there was no refund liability at any stage. Decision [8] The intention of the legislation that is readily apparent from reading these provisions, is that an excess benefit payment is a payment "paid in respect" of an entitlement and is therefore in the nature of a debt refundable from the entitlement. Whatever provisions may exist elsewhere for repayment by the claimant, s 373 defines the liability of the insurer. As Mr Barnett submitted, an excess benefit payment is to be treated as weekly compensation. That is the basis for the liability of the insurer to the department. [9] I note that s 373(4)(a) was silent as to whether the insurer must refund the excess benefit payment only while the entitlement remains unpaid. Read literally, it obliges the insurer to pay even after it has paid the claimant, if it then learns that the claimant has received an income-tested benefit in respect of a relevant period, or if requested by the relevant department. [10] In my view, the insurer is required to act reasonably in making a decision to pay a claimant without refunding an excess benefit payment. Acting reasonably supposes the making of ordinary enquiries. It would be manifestly unreasonable to adopt a policy of making no enquiries to see whether s 373 applies before making back-payments. For the insurer to limit its knowledge by deliberately omitting to make an enquiry would be contrary to the clear purpose of recovering excess benefit payments. It would also place the insurer in the position of carefully interrogating its own records in order to ascertain that it has or has not knowledge of a relevant benefit payment, otherwise it might later be found to have had knowledge that made it liable for repayment to WINZ before calculating and making the backdated payment to the claimant. Such a course of action would be improper and would involve a methodical form of deception that the insurer could not legitimately follow in making payment decisions. [11] The appellant's argument is that the answer to liability of the insurer is to be ascertained retrospectively. That is to say that, even accepting that the insurer has some obligation to enquire, once the enquiry produces a negative result the insurer has never had knowledge and has never had any obligation to refund. The appellant argues that this conclusion follows in relation to any periods for which no income- tested benefit was paid. A possible difficulty with this is that "period" is not defined. It may mean the period for which a benefit was paid or may mean the period for which a claim to an entitlement is established. I accept however, that subs (1) describes a sequential process. A reverse sequence is found in s 374 which deals with a person who receives an entitlement and later establishes a claim to an income tested benefit in respect of all or part of the same period. The natural meaning of subs (1) is that it refers to the period during which an income-tested benefit is paid. [12] It follows therefore that the insurer does not know the section applies for some period or periods, and does not have to refund the excess payment for that period or those periods. But that is only a circuitous path to the self-evident conclusion that the insurer is not liable to make a payment for some periods. The qualification in subs 4(a) does not relieve the insurer from making an enquiry. [13] Randerson J in Knight decided that there can be no retrospective deeming that the insurer had all information necessary, when the absence of any relevant post-accident income is later ascertained. The same reasoning applies to the refund obligation. I think that Mr Barnett's submission is correct, that is to say the provision in point is s 101 and the necessary information is the answer to the insurer's reasonable and responsible enquiry. Because the insurer had a potential liability it was necessary to ascertain whether s 373 applied and if so what refund had to be deducted. For periods where no deduction was required, the insurer still needed to know that before making the payment. [14] For those reasons, and for the reasons expressed in the earlier judgment of 18 June 2007, the appeal is dismissed. Judge D A Ongley District Court Judge --.- --- -....