Hawkins Construction Limited v Accident Rehabilitation and Compensation Insurance Corporation

IN THE DISTRICT COURT HELD AT WELLINGTON Decision No. 61/99 UNDER The Accident Rehabilitation and Compensation Insurance Act 1992 AND IN THE MATTER of an appeal pursuant to section 91 of the Act BETWEEN HAWKINS CONSTRUCTION LIMITED of Auckland Appellant (Appeal No. DCA 3/98) 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 17th day of February 1999 APPEARANCE/COUNSEL P Mills for appellant D Tui for respondent RESERVED JUDGMENT OF JUDGE A W MIDDLETON The issue in this appeal is whether the experience rating assessment levied against the appellant was correct. The appellant's employee (Plier) lodged a claim for cover with the respondent in July 1994. In his description of how the injury was caused, the application stated "hitting in peg with sledge hammer and missed peg. Pulled muscle in neck.". The appellant's General Practitioner certified Plier as being unfit for work for two days. On 19 July 2 1994 the appellant's Area Manager completed a work injury report in which he noted . that the appellant accepted Plier's injury which occurred on 11 July 1994 as being a work injury. A further medical certificate from Plier's General Practitioner, Dr A Borwick, indicated that Plier was unfit for work up to 31 July 1994 during which period he received weekly compensation. Plier returned to work on 1 August 1994 but was again certified as being unfit for work on 19 September 1994. Plier has received weekly compensation since that date. In a report to Dr Borwick, dated 4 January 1995, Mr K Davey, an Orthopaedic Surgeon, noted that he had examined Plier and recorded the history of the incident with the sledgehammer. He also recorded Plier's statement to him that he had suffered a number of injuries in the past, including a fracture in the lumbar spine as a result of rugby and that he had had previous rugby injuries to his shoulders and neck. Dr Borwick noted that x-rays in December 1994 indicated that his thoracic spine looked normal while the cervical spine showed a marked narrowing of the disc space between C5/6 with "quite extensive osteophytic lipping and the anterior vertebral margin on that level, probably indicating an old injury." Dr Davey concluded: "His problem seems to be a soft tissue strain of the supporting structures of the shoulder girdle and the muscles in the region of the cervico-thoracic junction but there is nothing at all localising on clinical examination today and I really cannot offer him any specific treatment." In a report dated 21 February 1995 Mr R Seemann, a Rehabilitation Specialist, reported to Dr Borwick that "clinically Mr Plier appears to have suffered a significant tear of his left trapezius muscle." Following a request from Mr Davey an MRI scan was undertaken which recorded degenerative changes at the C5/6 disc with a small disc prolapse and posterior osteophyte formation. In a further report to Dr Borwick on 25 September 1995 Mr Seemann noted "Ross continues to have a lot of pain in the neck and upper back. I think that now there is some explanation for this and will await Mr Kevin Davey's opinion when he sees him on Friday." Mr Davey's report on 29 September 1995 to Dr Borwick again noted the degeneration at the C5/6 level which he concluded was relatively minor and did not explain Plier's then current symptoms. He concluded: "I have explained to him that I still regard his injury as a strain of the soft tissues i.e. muscles and ligaments of the lower cervical and shoulder girdle region. There is no surgical treatment which is likely to help him and I think one must persevere with conservative treatment, which I will leave to the team at the Rehabilitation Unit." Plier was then referred to Mr C Martin, a Neurosurgeon, who reported to Dr Borwick that he considered an anterior fusion might assist Plier in return to light work. 3 After the appellant queried the assessment of Plier's claim costs to it, further . information was sought from Dr Borwick who advised on 9 April 1996: "In Mr Plier's notes there are a fair number of injuries to his back, to knees and so on over the years, mostly due to sport, but these don't seem to have prevented him from working to any great degree. For example, Mr Plier suffered fractures of 3 transverse processes in his lumbar vertebrae in 1988 following a game of rugby. This injury is quite distinct from the injury suffered in 1994 when his lower neck intervertebral disc ruptured. During the time in question, I have the following injuries on record November 1992 splinter left palm, infection April 1993 sprain left ankle June 1993 dislocation right little finger July 1993 strain low back lifting October 1993 splinter left hand July 11th 1994 strain levator scapulae muscle, swinging a hammer In fact this last injury turned out to be the ruptured disc in question. It is complete distinct from the other injuries, and although it was not at first suspected, the poor subsequent progress eventually lead to the correct diagnosis." As a result of that information the respondent concluded that Plier had suffered a new injury in July 1994 which was not an aggravation of his previous injuries and that the costs would remain on the appellant's claims history. After a certain amount of correspondence between the appellant and the respondent, an experience rating assessment was issued on 4 June 1996 for the claims year ending 31 March 1995 which included the costs incurred in respect of Plier . The appellant applied for a review of that decision. The Review Officer requested a further report from Mr Martin which is dated 20 January 1997 in which he gave as his opinion: "Thus when Mr Plier jarred his neck by missing with a sledgehammer, this jar, in someone of Mr Plier's build (Mr Plier is extraordinarily heavily built) would only be "the last straw that broke the camel's back" so to speak. Thus I would suggest that this was only 10% of the cumulated trauma to his neck, but the last one which added up to enough to produce symptoms." (emphasis mine) As a result of Mr Martin's report, the Review Officer issued a decision on 12 March 1997 allowing the appellant's application and remitted the file back to the respondent to consider whether it should exercise its discretion under factor "g" of the Experience Rating Regulations. On 14 May 1997 the respondent issued a new decision in which it apportioned 100% of Plier's costs to the appellant. The appellant 4 applied for a review of that decision and the Review Officer dismissed that . application and held that the appellant and accepted that the injury in July 1994 was a work injury and that the "eggshell skull" principle applied to the extent that the appellant was liable for all the consequences of that accident. It is against that decision which the appellant now appeals. One of the grounds for appeal was that the respondent had failed to disclose to the appellant Mr Seemann's report. That issue has now been rectified prior to the hearing of the appeal. The appellant contends that there are serious issues of causation in relation to the accident on 11 July 1994 and that in making his decision the Review Officer wrongly applied the provisions relating to factor "g" in that he failed to give adequate weight to Mr Martin's report and failed to take into account factors relating to the appellant as an employer. The relevant law is sections 101 and 104 of the Accident Rehabilitation and Compensation Insurance Act 1992 and regulations 3A and 5(1) of the Accident Rehabilitation and Compensation Insurance (Experience Rating) Regulations 1996. The issue of an employer's premium liability under sections 101 and 104 of the Act and regulation 5(1) of the Experience Rating Regulations was considered by His Honour Judge Beattie in Tranz Rail Ltd (177/98) in which he stated: "Section 101 of the Act requires that every employer pay a basic premium to the Corporation at a prescribed rate on the amount of earnings paid to its employees. Section 104 then allows for an adjustment of this basic premium by reference to the accident experience of the employer. The basis of and procedure for adjusting the premium is as prescribed by regulation. Regulation 5(1) of the Accident Rehabilitation and Compensation Insurance (Experience Rating) Regulations 1993 provides the formula for calculating the premium liability of large employers which is as follows: a x [b-(c x b) - (d xe) - (fx g)] In the above formula "factor g" is described as: 'all, or any such portion as the Corporation in its discretion may determine, of the qualifying payments (if any) made by the Corporation in the premium liability year pursuant to the qualifying claims (if any) attributable, or deemed to be attributable to the large employer in the premium liability year." Regulation 5(1) requires the respondent under factor "g" to load any qualifying payments made in a premium liability year to the qualifying claim attributable to a large employer. For these purposes a "qualifying payment" is defined under the Regulations as being a payment that the respondent makes under the 1992 Act which is able to be associated with a "qualifying claim" attributable to an employer. In that 5 regard, a "qualifying claim" means a work injury claim lodged and accepted in . respect of employment with that employer. Notwithstanding, the respondent's duty to load any "qualifying payments" against an employer liable for a "qualifying claim" it has a discretion under factor "g" to apportion all or some of the payments against the employer. The issue in this appeal is whether the payments made to Plier for the eight months period following his accident on 11 July 1994 up to 31 March 1995 constitutes a "qualifying payment" attributable to the appellant's qualifying claim. It has been accepted in a number of appeals that by virtue of section 89(4A) the issue before the Court is not a challenge to Plier's entitlement but is a challenge to the loading of the payments against the appellant's "qualifying claim". The appellant suggests that Plier should not have cover because his symptoms are the result of degeneration and not the accident of 11 July 1994. However, I consider that the question of cover has already been determined and is not an issue in this appeal and the only issue is whether the respondent is correct to attribute Plier's claim to the appellant. The appellant, as early a 19 July 1994, accepted that Plier had suffered a work injury in the course of his employment with the appellant. Plier's claim for cover was then accepted by the respondent as a work injury. I have noted the relevant portions of the various medical reports for which Plier continued to suffer symptoms up until the relevant period which extended to 31 March 1995. At all times, his complaint has been of pain in the neck area which the Review Officer concluded, with the benefit of Mr Martin's report, as having been a case where the "eggshell skull" principle was invoked. The medical evidence clearly establishes that the separate accident on 11 July 1994 was the principal cause of Plier's symptoms for the period to 31 March 1995 and were not the result of either degeneration or an exacerbation of previous injuries. The appellant submitted that as a result of Mr Martin's report, in which he attributed 10% of the cumulative neck trauma to the 11 July 1994 accident, that must be read with his comment that that accident, having regard to Plier's build, "would only be the last straw that broke the camel's back". The appellant submits that on the basis of Mr Martin's assessment, there is ample ground for the exercise of the discretion under factor "g" to reduce the qualifying payments attributable to the appellant to 10% of the costs involved. The issue of factor "g" was considered by His Honour Judge Beattie in Tranz Rail Ltd from which he concluded that with the assistance of Judge Ongley's decision in Waipa District Council (199/97) in exercising its discretion under factor "g" the respondent is confined to consideration of the aspects concerning the "qualifying payment" and whether it should be attributed to the employer. His Honour agree with Judge Ongley that the respondent is not able to take into account broad considerations of fairness where there is no statutory authority to do so. The evidence establishes that the symptoms for which the respondent paid compensation to Plier were those arising from the pain in his neck, shoulder and back region and for no other problems. They clearly related to the accident in July 1994 which the appellant itself accepted constituted a work accident. I consider that on that basis the payments made to Plier constituted "qualifying payments" which should be attributable in full to the appellant. I do not accept the appellant's submission that Mr Martin's report assists its submission that it is entitled to the exercise of the discretion under factor "g". Mr Martin's report does not establish that Plier aggravated an existing injury but only that on the basis of the "eggshell skull" principle that he was predisposed to suffering more serious consequences as a result of the July 1994 accident. On that basis I am satisfied that the respondent was correct to attribute the whole of the costs to appellant. The appellant has submitted that a further factor which should have been taken into account in the exercise of the discretion under factor "g" is its good work history. No argument has been taken with the fact that the appellant has established good work practices and is conscientious in safety matters so far as its employees are concerned but I do not consider that that is an issue for consideration in the exercise of the discretion under factor "g". that is really inviting the Court to consider the matter of fairness. I consider that the only issue was whether or not the injury sustained by Plier was a work injury, the cost of which should be attributable to the appellant. As I have said, I find that that is so and the appeal is dismissed. DATED at WELLINGTON this 12 th day of March 1999 A W Middleton District Court Judge dca314-98.doc (nr)