Bridges v Accident Rehabilitation and Compensation Insurance Corporation

IN THE DISTRICT COURT HELD AT HUNTLY Decision No. 80 199 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 LINDSAY BRIDGES DCA 465/98 Appellant AND ACCIDENT REHABILITATION AND COMPENSATION INSURANCE CORPORATION a body corporate duly constituted under the provisions of the said Act Respondent HEARD on 23 February 1999 APPEARANCES: Ms F Taylor, advocate for appellant Mr JD Palmer, counsel for respondent RESERVED JUDGMENT OF JUDGE M J BEATTIE The issue in this appeal is whether the calculation of the appellant's weekly earnings for weekly compensation purposes is to be carried out by applying the provisions of section 40(2)(b) or section 40(2)(c) of the Act, that is, whether the appellant can be regarded as being in permanent employment or not for the purposes of section 40 of the Act. 2 Background On 6 January 1993 the appellant injured his back in an accident at work. He has been incapacitated from that date and has an entitlement to weekly compensation. It is common ground that the Corporation's initial calculation of weekly compensation for the appellant was incorrect as it did not take into account self-employed income in the 12 months immediately preceding the commencement of incapacity. In 1997 the respondent recalculated the appellant's weekly earnings and entitlement to weekly compensation by calculating same under the provisions of section 42 of the Act so as to take into account both his earnings as an employee and his self-employed earnings, both of which in fact he had earned in the 12 months immediately preceding the commencement of incapacity. The dispute that has arisen between the appellant and the respondent is the divisor to be applied for the amount of his earnings as an employee for the income so earned in that 12 month period. Whether the amount of such income is to be divided by the number of full or part weeks during which the appellant earned those earnings as an employee, which the appellant states was 18.8 weeks, or whether that sum is to be divided by 52, being the divisor stated in section 40(2)(c). The sum so calculated would then be added to the amount calculated from self-employed income in accordance with section 41. There is no dispute as to that latter calculation although it is different from that which was calculated by the respondent. The reason for the difference of view in respect of the provisions of s.40 is because at the time that the appellant suffered his injury he was regarded as being self-employed and had been so for some period and it was only in the earlier part of the 12 months immediately preceding the date of injury that he had been an employee and had received earnings as an employee. 3 The appellant is a highly skilled and trained fitter/welder and at the time of his accident was aged 37 years. He had been in regular employment throughout the preceding 18 years and this employment had taken more than one form. Because of his specialist abilities his services were sought after and he would go from one contract or job to another. In some of those positions he would be regarded as an employee and get paid a salary with the employer being responsible for PAYE deductions, and in others he would be regarded as an independent contractor and be paid according to his worth but would not be regarded as being an employee. There was this mix of those two types of employment that had occurred in the 12 month period immediately preceding his accident, and in terms of the chronology, it was a fact that at the date of his accident he was regarded as being self-employed, he being engaged on a contract basis by an organisation known as Service Engineers. The appellant was able to command a salary, wage or remuneration of about $1,000 per week. It is common ground that within the 52 weeks prior to incapacity the appellant earned the sum of $17,236 as an employee and from the start of his contract with Service Engineers in November 1992 until the date of his accident on 6 January 1993 he had earned $11,178. In its calculation of the appellant's entitlement to weekly compensation, the respondent has taken the earnings as an employee of $17,236 and divided that sum by 52 in accordance with section 40(2)(c) of the Act. The respondent has used (c) because it contends that the appellant could not be said to be in permanent employment immediately before the commencement of incapacity. It considers the phrase "permanent employment", for the purposes of section 40, only applies to permanent employment as an employee and the appellant was not in permanent employee as an employee at the time of incapacity, but rather he was self-employed. 4 It was on the basis of that finding that the Review Officer confirmed the Corporation's assessment of the appellant's weekly earnings, based as it was in large part on an application of section 40(2)(c) of the Act. Relevant statutory provisions 40. Calculation of weekly earnings where earner had earnings solely as an employee during the 12 months before commencement of incapacity - (1) This section applies only to earners who are earners immediately before the commencement of the incapacity and who, during the 12 months immediately preceding the commencement of the period of incapacity, had earnings as an employee and who did not also have earnings other than as an employee. (2) The weekly earnings of any person to whom this section applies shall be, - (b) In respect of any weekly period of incapacity after the period referred to in paragraph (a) of this subsection, if the person was in permanent employment immediately before the commencement of the incapacity, the person's earnings as. an employee during the 52 weeks immediately before the commencement of the incapacity, divided by- i) The number of full or part weeks during which the person earned those earnings as an employee during that 52-week period; or (ii) Thirteen, - whichever is the greater: (c) In respect of any weekly period of incapacity after the period referred to in paragraph (a) of this subsection, if the person was not in permanent employment immediately before the commencement of the incapacity, 1/52nd of the person's earnings as an employee during the 52 weeks immediately before the commencement of the incapacity. (2A) For the purposes of this section, a person shall be regarded as having been in permanent employment if, in the opinion of the Corporation, that person would have continued to receive earnings from that employment for a continuous period of more than 12 months after the commencement of incapacity if the personal injury had not occurred. 42. Calculation of weekly earnings where earner had both earnings as an employee and other earnings during the 12 months before commencement of incapacity - 1) This section applies only to earners who are earners immediately before the commencement of the incapacity and who had both earnings as an employee and earnings other than as an employee during the 12 months immediately preceding the period of incapacity. b) In respect of any period of incapacity after the period referred to in paragraph (a) of this subsection, the total of- 5 (i) The person's weekly earnings calculated under paragraph (b) or paragraph (c) of section 40 of this Act multiplied by the number of weeks or part weeks during the 52 weeks immediately preceding the commencement of the incapacity during which the person earned weekly earnings other than as an employee. In section 3 of the Act the definition of earner (means) any natural person who engages in employment, whether or not as an employee: employment" (means) work engaged in or carried out for the purposes of pecuniary gain or profit; and in the case of an employee, includes any period of paid leave other than paid leave on the termination of employment. Submissions Ms Taylor, representing the appellant, submitted that the definition of "employment" in the Act is such that it includes not only employment as an employee but also self- employment. She submitted that with that definition the factual circumstances were that the appellant was in permanent employment at the time of his accident, having been employed as a boilermaker/welder for over 18 years in full-time employment and that on the evidence that situation would not have changed but for his incapacity. She submitted that section 42, which was the provision which applied to the appellant for the calculation of weekly earnings, was an amalgam of sections 40 and 41, therefore section 40 had to be adapted to take account of being used in circumstances where the claimant did have earnings other than as an employee as well. Mr Palmer, counsel for the respondent submitted that section 40(2)(b) only applied if the claimant was in receipt of earnings as an employee immediately before incapacity. He submitted that section 40 was dealing only with persons who had earnings solely as an employee and that section 40(2)(b) must be read with that in mind and that the claimant's permanent employment must be that of an employee immediately before the commencement of incapacity. 6 He submitted that the provisions of section 40(2A) assisted with that interpretation where he says that the phrase "from that employment" must mean that employment to which section 40 is applying, namely employment as an employee. Mr Palmer submitted that section 40(2)(b) would be applicable if the claimant was in receipt of two sources of income at the same time, namely, earnings as an employee and earnings other than as an employee and that this state of affairs existed immediately prior to incapacity. However if that state of affairs did not apply then he submitted it was the situation where a self-employed person takes the risk of becoming incapacitated on himself and ought to take out private employment protection insurance in those circumstances. At that point the claimant does not have an employer "carrying him". Finally, Mr Palmer submitted that even if the Court were to find that section 40(2)(b) did not have the restrictive meaning that he contended, nevertheless, he submitted that on the facts the appellant could not be regarded as having been in permanent employment at the time of incapacity as he was on a fixed contract with Service Engineers which was due to expire in March 1993. In those circumstances it could not be said that he would likely continue to receive earnings for a period of 12 months or more but for incapacity. Decision The question for determination in this appeal requires the Court to rule whether the phrase in permanent employment immediately before the commencement of the incapacity as set forth in section 40(2)(b) means permanent employment as an employee. That particular phraseology is only used in section 40, which is the provision primarily used to calculate weekly earnings where the earner has had earnings solely as an employee for the 12 months period before incapacity. Section 41 of the Act, which is the provision which provides for the calculation of weekly earnings where the claimant has earnings solely other than as an employee in 7 that 12 month period, the phraseology is simply that it applies to persons who were earners immediately before the commencement of incapacity. Similarly section 42, which is the section which covers persons such as the claimant who has earnings from both self-employed and as an employee status in that 12 month period, the qualification again is only that the person was an earner immediately before the commencement of incapacity. On the facts the appellant is clearly an earner and is accepted as such by the respondent and therefore by definition the appellant is a natural person engaged in employment. Section 42(2)(b)(i) refers to the calculation being made under paragraph (b) or (c) of section 40(2), whichever is applicable in the circumstances. Looking therefore at section 40(2) from the perspective of applicability I find that in order to qualify at all a person must be an earner and be an earner immediately before the commencement of incapacity, ie he must have been in employment. The qualification in (2)(b) is that he must have been in permanent employment. Thus one can be an earner immediately before the commencement of incapacity but nevertheless not be an earner in permanent employment. This distinction I find takes account of the casual employee or fixed short-term employment. If a person were to fall into either of those categories they would come under (2)(c) and have the divisor of 52 because the nature of their employment could not be said to be certain or identifiable. Indeed they may elect not to work when it suits them. Therefore it cannot be said with any certainty that the pay packet they received the week before incapacity would continue to be received for the ensuing weeks after incapacity because it was up to them in many instances whether they elected to work or not. This is to be contrasted with the permanent employee who is in a regular and identifiable employment situation which with a certain degree of confidence could be predicted to continue on but for incapacity and therefore the loss of income through inability to work is identifiable and real. For the foregoing reasons therefore I find that the respondent's restrictive interpretation of section 40(2)(b) is not correct and that in the context of a claimant who qualified under section 42, there is not the need to imply into the phrase "permanent employment" the words "as an employee". Indeed those words are not used anywhere in the Act and there is no need for them to be used for ordinary and sensible meanings to be obtained from the provisions of sections 40 and 42. I find this particularly so when one considers the definition of "employment" which of course must have associated with it the meaning of employee and that definition must include self-employment as there is the specific proviso in that definition for the period of employment in the case of an employee to include any period of paid leave. Accordingly then I find that the fact that the appellant was not in an employee situation immediately before the commencement of incapacity does not mean that he cannot come within the provisions of section 40(2)(b). However as that section states the claimant must establish that he was in permanent employment immediately before incapacity, the provisions of section 40(2A) are applicable. It requires the respondent in the first instance to make a value judgment as to whether a claimant is or is not in permanent employment having regard to the criteria of (2A). In the present case it is contended that because the appellant's contract, ie his current work contract, was due to come to an end in March 1993 he could not be said to have been in permanent employment. I find that the words "permanent employment" have a wider connotation that simply permanent employment in a particular position. As previously noted "employment" is defined as meaning work engaged in or carried out for the purposes of pecuniary gain or profit. Permanent is defined in the New Collins Concise English Dictionary as meaning Existing or intended to exist for an indefinite period: not expected to change: not temporary. 9 From those definitions I find that intended to exist, and not expected to change, import a meaning that either from the point of view of the employee or from the point of view of the workplace generally, it is to be expected that a person will continue to be engaged in work for the purposes of pecuniary gain or profit. In the case of this appellant I find the Review Officer took a far too simplistic view when he found that simply because a particular contract of employment was due to expire in March, it could not be said that he was going to continue receiving earnings from his boilermaker/welding skills for a continuous period of more than 12 months. I find that the word employment does not restrict the work to a particular contract in the case of self-employed or even to a particular employer in the case of an employee where there is evidence that the expectations or intended circumstances are that the claimant will continue in work for pecuniary gain for that 12 month period. In the case of this appellant there was incontrovertible evidence of his skill and, if you like, his employability in the marketplace. His track record was employment in his particular field, unbroken for 18 years, and I find that there was no evidence which could suggest that either the appellant's own employability or the marketplace were such that he could not expect to continue to be able to obtain work on a full-time basis. His evidence at the review hearing was that future employment was always arranged during the currency of an existing job and there was no evidence to suggest that the normal pattern which he had carried on for several years would not have continued but for his incapacity. In finding otherwise I find that the Review Officer was far too restrictive in his consideration of the evidence available. Having found therefore that the appellant does come within the criteria necessary for section 40(2)(b) to apply insofar as the calculation of his earnings as an employee is concerned as contained in section 42(2)(b)(i), I find that the method of calculation used which was in fact the method prescribed by section 40(2)(c) was incorrect and the decision in respect thereof is hereby revoked. 10 At the hearing it was agreed by counsel for the parties that in fact there was an error in the calculation of the portion of the appellant's income from earnings other than as an employee in that the multiplier for that, pursuant to section 42(2)(b)(ii) should be 16 and not 9, as was held by the Review Officer, and I direct that the calculation of the appellant's weekly earnings for the purposes of determining weekly compensation use the multiplier of 16. The effect of this decision is that the appellant is successful and it now requires the respondent to make a fresh calculation of the appellant's entitlement to weekly compensation and in so doing applying the provisions of section 40(2)(b) where the divisor for his earnings as an employee should be 18.8. The appellant is entitled to costs which I fix at $800. DATED at WELLINGTON this 315t day of March 1999 MJ Beattie DISTRICT COURT JUDGE Bridges.doc