Clinton v Accident Rehabilitation and Compensation Insurance Corporation

IN THE DISTRICT COURT HELD AT WELLINGTON Decision No. 95 /98 UNDER The Accident Rehabilitation and Compensation Insurance Act 1992 AND IN THE MATTER of an appeal pursuant to section 91 of the Act BETWEEN MATTHEW BRIAN CLINTON of Nelson Appellant (Appeal No. DCA 12/98) AND ACCIDENT REHABILITATION AND COMPENSATION INSURANCE CORPORATION a body corporate duly constituted under the provisions of the said Act Respondent HEARD at NELSON on the 22nd day of April 1998 APPEARANCES Appellant in person A D Barnett for respondent DECISION OF JUDGE A W MIDDLETON The appellant has appealed against a decision of the Review Officer who confirmed the respondent's primary decision that his retiring allowance did not constitute earnings as an employee within the meaning of the Accident Rehabilitation and Compensation Insurance (Earnings Definitions) Regulations 1992. The appellant suffered personal injury by accident on 16 May 1997 as a result of which the respondent accepted his claim for cover. At the time of his accident the 2 appellant was employed by Amatal and in the twelve months previous, he had been employed also by NIWA and Buller Port Services. The appellant had taken early retirement from NIWA, with which enterprise he had been employed for a number of years. In a statement of his redundancy calculation on leaving NIWA, it is noted that he received $14,966.25, being three months salary in lieu of notice together with the sum of $3,280.27, representing 20 days of accrued leave and a further severance payment of $41,929.52. In assessing the appellant's entitlement to weekly earnings the respondent calculated the appellant's earnings as an employee on his twelve months earnings prior to the accident but excluded from that calculation the payment in lieu of notice and the severance payment from NIWA. The appellant applied for a review of that decision. In his decision the Review Officer revoked the respondent's primary decision and directed that the respondent include the three months payment in lieu of notice as part of the appellant's earnings. The respondent subsequently issued a revised decision based on that decision. The appellant has appealed against that part of the Review Officer's decision which did not allow the inclusion of the severance payment in the calculation of relevant earnings for the purpose of assessing his entitlement of weekly compensation. The appellant's principal submission is that he had worked in the job for fourteen years and was entitled to be recompensed for it. He said that as he had paid tax on the amount of the severance payment it should be included as part of his income for the purpose of the assessment. Mr Barnett submitted that the Accident Rehabilitation and Compensation Insurance (Earnings Definitions) Regulations 1992 define "earnings as an employee" in any income year as being "all source deduction payments of the person for the income year; and does not include any redundancy payment and any retiring allowance." He submitted that the definitions of "retiring allowance" in the Regulations is: "Retiring Allowance, in relation to any employee, means any payment made to the employee (a) On or after Ist January 1994; and (6) Which is not regularly included in the earnings of an employee (excluding paragraph (ix) of that definition) of the employee and which is not paid in lieu of or in substitution for any earnings as an employee (excluding paragraph (ix) of that definition) which would otherwise have been paid to the employee; and (c) In consequence of the retirement of the employee from employment with the employee's employer." Mr Barnett submitted that while the retiring allowance is a source deduction payment, it is therefore taxed at source but not all payments taxed at source come within the definition of "earnings as an employee". That definition expressly excludes "redundancy payment" and any "retiring allowance". Mr Barnett submitted that the payment made to the appellant after 1 January 1994 was made in "consequence of the 3 retirement". He submitted that on that basis the requirements of paragraphs (a) and (c) of the definition are met. Mr Barnett submitted that in relation to requirement (b) the appellant's retiring allowance was calculated on the basis of length of service, so that it could not be said to be an allowance "paid in lieu of or in substitution for any earnings as an employee ... which would otherwise have been paid to the employee." He submitted that it was a payment in recognition of his length of service and was not in lieu of earnings which he would have otherwise been paid had he continued to work for NIWA. Mr Barnett submitted that the retiring allowance paid to the appellant was not a payment "for the income year" but was made in recognition of his fourteen years of service. The statement of the redundancy calculation demonstrates that the severance payment is based on years of service and while for tax purposes it has to be taxed in the year of payment it is still excluded from the calculations of "earnings as an employee" for the purpose of the Accident Rehabilitation and Compensation Insurance legislation. While source deduction payments are subject to tax under the Income Tax Act, the Accident Compensation legislation provides its own specific definitions which take precedence over the tax legislation. I agree with Mr Barnett's submissions as to the interpretation of the Regulations from which it is clear that the decision of the Review Officer was correct and should be upheld. The appeal is dismissed. DATED at WELLINGTON this 7 th day of May. 1998 A W Middleton District Court Judge dca12-98.doc (nr)