Foss v Accident Rehabilitation and Compensation Insurance Corporation

IN THE DISTRICT COURT HELD AT PALMERSTON NORTH Decision No. 30 /2000 IN THE MATTER of the Accident Rehabilitation and Compensation Insurance Act 1992 AND IN THE MATTER of an appeal pursuant to section 91 of the Act BETWEEN JAQUELINE FOSS of Palmerston North (Reference DCA 181/99) Appellant AND ACCIDENT REHABILITATION AND COMPENSATION INSURANCE CORPORATION a body corporate duly constituted under the provisions of the said Act Respondent HEARD on the 3to day of February 2000 APPEARANCES Mr A R V Rowlett advocate for appellant Mr M H L Morrison counsel for respondent RESERVED JUDGMENT OF JUDGE M J BEATTIE The issue in this appeal is whether the respondent was correct to decline to remit an overpayment of weekly compensation made to the appellant. The facts as I have found them which are relevant to the determination of this appeal are as follows: In January 1996 the appellant suffered an injury to her back in the course of her employment as a nurse and lodged a claim for cover with the respondent. That claim for cover was accepted and the appellant began to receive weekly compensation because of her incapacity. The appellant's weekly compensation was calculated deal81.99jaqueline.doc (s) from information supplied to the respondent by her employer Mid Central Health Limited and it seems that mistakenly included in the amount of the appellant's income was a redundancy payment which had the effect of incorrectly inflating her income. The appellant received weekly compensation at a rate greater than she was entitled as a consequence of that incorrect calculation for the period 8 February 1996 to 5 November 1996 when that error was discovered. The total amount overpaid amounted to $6385. The amount of overpayment on a weekly basis of $219.62, the appellant having been paid $624 per week whereas her true entitlement was $404.38 per week. There is no dispute as to the amount of the overpayment and it is accepted by the respondent that the appellant received the payment in good faith and that the error which caused that overpayment to be made was not contributed to by the appellant in any way. At the time the appellant commenced to receive the weekly compensation at the greater than correct amount she was living apart from her husband with her two dependent children aged approximately 8 and 10 years in her care. By the time the respondent made its decision not to agree to the remission of the overpayment the appellant and her husband had reconciled. In a statutory declaration made on the 12" September 1997 the appellant indicated that her then budget was such that she could not afford to repay and she gave details of her budget in that regard. During the period that the appellant did receive the overpayment she simply applied the money received to cover hers and her children's weekly needs and the money was spent on day to day general living expenses. In her evidence the appellant said that she was budget conscious and that she would not spend money she did not have, but on the level of income that she was receiving she was able to provide for herself and the children including various payments for their sporting endeavours and music lessons. She said that when the overpayment was discovered and the lesser sum began to be paid she had to cut back on her expenditure accordingly. SUBMISSIONS Mr Rowlett, advocate for the appellant, submitted that the appellant had altered her position in reliance on the overpayment in that she had determined her weekly deal81.99jaqueline.doc (s) 2 budget based on her income and the needs of herself and her children and that if she had known she had only been entitled to a lesser sum she would have budgeted accordingly so that her spending always remained within her means. Mr Rowlett submitted that the facts of this case were different from the previous cases where this Court had not accepted that the spending of money in the normal course of living was an altering of position. He submitted that in this case the appellant had not used the money for normal expenditure but rather the extra income had been used in what he described as abnormal payments, that is payments which she would not have made or been able to make on the lesser sum. He submitted that the appellant in setting her budget and level of expenditure based on the income she received did alter her position. He referred to the decision of Holt v Markham [1923] 1 KB 504 as support for that submission. In addition Mr Rowlett submitted that the fact that the overpayment extended for a period of nine months gave the appellant reason to believe that the sum received was her entitlement and she was entitled to adjust her living expenses accordingly. Mr Morrison, counsel for the respondent, submitted that there was no evidence that the appellant altered her position in the way in which that phrase must be taken to mean. He submitted that there was ample precedent for the principle that the mere spending of the money on day to day normal and usual living expenses was not an altering of position and he cited decisions of this Court, the High Court in K J Davies (1976) Limited v Bank of New South Wales [1981] 1 NZLR 262 and the Court of Appeal in its decision in National Bank of New Zealand v Waitaki International Processing NZ Limited {1997] 1 NZLR 724. Counsel further referred to the decision of this Court in Mark (242/99) where this Court had rejected a submission similar to that which was now being put forward on behalf of the appellant that the receipt of, and the expectation of continuing receipt of, a greater sum for the claimant and family needs and the spending of the money on those needs accordingly was an alteration of position. Counsel further submitted that in line with the decisions of this Court in Hurley (49/99) and Fraser (137/98) where there has been no altering of position there can be no inequity arising in the claimant being required to repay. deal81.99jaqueline.doc (s) 3 DECISION The relevant statutory provision which the Court is required to consider in the context of the facts as found above is section 77(2) of the Act. That section states as. follows: "The Corporation shall remit in whole or in part a debt which arose as a result of an error not intentionally contributed to by the debtor if the Corporation is satisfied that the person receiving the amount so paid in error did so in good faith and has so altered his or her position in reliance on the validity of that payment that it would be inequitable to require repayment. " In this case we are concerned firstly to determine whether the appellant has so altered her position in reliance on the validity of the payment. The undisputed facts are that she received the sum of $219.62 per week more than she should have for a period of approximately nine months and that the undisputed amount of the overpayment arising is $6385. As I have found on the facts the appellant spent this money as it was received for general living expenses for her and her two children during that period. She did not enter into any long-term financial commitments or enter into any contractual obligations which were reliant on the receipt of a specified sum by way of income for her to service that debt or obligation. I find that the appellant simply assessed that she had a certain amount of money each week to spend on hers and her children's needs and she tailored her living standard accordingly. She stated that had she in fact only been receiving the lesser sum to which she was due she would have tailored her living expenses and lifestyle to suit that lesser sum. Indeed she stated that she did not believe in borrowing or going into debt so she would not have sought to maintain a higher lifestyle than her income would allow. In the context of that scenario it was Mr Rowlett's submission that the additional weekly expenditure that the appellant incurred should be regarded as "abnormal" meaning that she would not have spent it if she had not had it to spend. It was his submission that in so tailoring her expenses to match her income she was altering her position. Such I find cannot be the case and that notion runs counter to the accepted jurisprudence which has arisen in relation to section 77(2) and its near relation deal81.99jaqueline.doc (s) section 94B of the Judicature Act 1908. The decision of the High Court in K J Davies (1976) Limited v Bank of New South Wales [1981] 1 NZLR 262 is authority for the proposition that for the purposes of section 94B of the Judicature Act 1908 the use and spending of monies in the ordinary course of business was not an alteration of position sufficient to bring that section into operation. That decision has been approved in subsequent decisions by the High Court and Court of Appeal. In previous decisions of this Court when considering section 77(2), that decision has been found to be persuasive and binding authority and it has been followed by this Court in numerous decisions, particularly Hurley (49/98), Fraser (81/98), Matthews (104/97) and Mark (242/99). Mr Rowlett has relied on the decision of Holt v Markham (supra) as authority for his submission. That was an action for monies had and received based on the ground that the payment was made under a mistake of fact. The essential fact being that the defendant had received a greater gratuity than that to which he was entitled upon his being demobilised from the Royal Air Force and the Ministry sought to recover the overpayment. By the time the error was discovered the recipient had lost the money which had been invested in a company which had gone into liquidation. The facts of the case, as reported, would indicate that the defendant spent virtually all of the gratuity in the investment and it was not used for daily living expenses as was asserted by Mr Rowlett. The decision in Holt v Markham is one based on estoppel and also the finding by the Court that there was no mistake of fact. Accordingly I find that it has little or no relevance to the principles of law applicable to section 77(2) of the ARCIC Act, save for it being an instance where the Court granted relief on equitable principles because it found that the recipient had acted to his detriment and altered her position in reliance on the validity of the payment. In addition to submissions concerning the appellant having altered her position, there were further submissions as to the appellant's present financial circumstances which Mr Rowlett submitted made it inequitable for repayment to be ordered. I do not deal81.99jaqueline.doc (s) 5 propose to consider the equitable principles which might apply if there had been a finding of an altering of position as it has now been established by the previous decisions of this Court that the financial circumstances of the recipient of the overpayment cannot be relevant or be considered in the equitable sense that is required under section 77(2) unless there has first been a finding that the recipient has altered her position in reliance on the payment. For the avoidance of doubt I say that financial hardship itself is not a ground for applying the provisions of section 77(2) in granting relief, there must be as a precondition of considering the equities whether there has been an altering of position in reliance on the validity of the payment. As was stated in the decision of Hurley (supra) considerations of inequity can only arise in the circumstances where there has been a finding of an altered position. Therefore whilst the Court has sympathy for the appellant and her circumstances, it cannot as a matter of law take account of them, as the necessary requirements which must be present to give rise to considerations of equity are not present in this case. For the foregoing reasons therefore the decision of the respondent must be confirmed and this appeal is dismissed. DATED at AUCKLAND this 22 day of February 2000. M J Beattie District Court Judge dcal81.99jaqueline.doc (s) 6