Northern Regional Health Authority v Accident Rehabilitation and Compensation Insurance Corporation

IN THE DISTRICT COURT HELD AT AUCKLAND Decision No. 9 /98 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 NORTHERN REGIONAL HEALTH AUTHORITY DCA 108/97 AND MIDLAND REGIONAL HEALTH AUTHORITY DCA 185/97 Appellants AND ACCIDENT REHABILITATION AND COMPENSATION INSURANCE CORPORATION a body corporate duly constituted under the provisions of the said Act Respondent HEARD on the 24th day of November 1997 APPEARANCES: Mr C T Gudsell for appellants Miss K Tahana for respondent DECISION OF JUDGE M J BEATTIE The issue in this appeal is whether the Corporation was correct in reassessing the appellants's employment premium classification for the years 1993 to 1996. 2 This decision covers the two separate appeals which had been lodged by the respective appellants against two separate decisions of different Review Officers delivered after hearings in Auckland and Hamilton respectively. It is acknowledged and agreed by counsel for all the parties that the relevant facts upon which this Court on appeal is required to make a determination are exactly the same for both appellants and counsel for appellants and respondent have each made submissions common to both appeals. This decision however relates to two separate and distinct appeals being decision on DCA 108/97 in relation to Northern Regional Health Authority and decision on DCA 185/97 in relation to the appeal of Midland Regional Health Authority. Background This matter concerns the correct employment premium classification for the two appellants for the years 1993 to 1996. For the purposes of the Employment Premium Regulations the appellants had classified their industrial activities as "Insurance Institutions, services of" for the period 1993 to 1994." For the period 1995 to 1996 the appellants used the classification unit "Health Insurance"." This change in category reflected a new system of classification which was introduced in 1995. In June 1996 the Corporation informed the appellants that it was in the process of reassessing premium classification units for the years 1993 to 1995 and reclassifying employers who were incorrectly classified. The Corporation requested a description of the appellants's activities during these years, together with details of the basis used to classify their activities. On the basis of information provided by the appellants the Corporation reassessed their premium classifications. In letters dated 5th September 1996 and 26 September 1996 respectively the Corporation informed the appellants that in its opinion the classification the appellants had selected was inappropriate. The Corporation reclassified the appellants's activities as "Statutory Bodies - activities 3 not elsewhere described" for the period 1993 to 1994, "Central Government Operation (not elsewhere classified)" for 1995 and "Central Government Administration" for 1996. The appellants each sought a review of these new classifications contending that their original classifications were correct. In decisions dated 21st February 1997 and 6th March 1997 respectively the respective Review Officers held that the Corporation's classification of the activities of the appellants were correct. Relevant Statutory and Regulatory Provisions "101. Premiums payable by employers - (1) There shall be payable by every employer, in accordance with this Act, a basic premium at such rate or rates as are prescribed on the amount of earnings paid or deemed to have been paid by that employer to its employees. 103. Classification of Industries - (1) Employers and earners who are not employees shall be classified into industry classes defined in regulations made under this Act for the purposes of setting premiums payable under sections 101 and 102 of this Act. 2) Premiums set under sections 101 and 102 of this Act shall be determined for each industry class defined under subsection (1) of this section. (3) Subject to this Act, the Corporation shall decide which classification of industry is appropriate in relation to any employer 4 or earner who has earnings other than as an employee by whom a premium is payable." The relevant regulations made for the purposes of sections 101 and 103 were the Accident Rehabilitation and Compensation Insurance (Employment Premiums) Regulations 1992 1993 1994 and 1996. The Employment Premium Regulations 1992 stated: "2 . Interpretation - . .. 'Industrial activity' means the industry, trade, business, profession or undertaking or an employer or a person who has earnings other than as an employee as determined by the nature of the goods or services produced or rendered by that employer or person who has earnings other than as an employee; or if no goods or services are produced or rendered, as determined by the nature of employment. (emphasis added) 3. Classification of earners for premium purposes - For the purpose of calculation and payment of premiums under the Act - ... (6 ) Except as provided in regulations 4 and 6 of these regulations employees shall be also classified according to the description of industrial activity, as set out in the Schedule to these regulations, which most accurately describes the employer's industrial activity, or where, because of the nature of the employee's work within a particular description of an industrial activity of an employer, more than one division is prescribed in relation to that particular 5 description, shall be classified in the division within that description which is appropriate to the nature of their work;" Thus in accordance with regulation 3(b) the Corporation is required to classify employers into one of the industrial activities listed in the Schedule to the regulations which most accurately describes the employer's industrial activity. Relevant Facts for Determination of Appellants's Industrial Activity The appellants are Regional Health Authorities formed under s.32 of the Health and Disabilities Services Act 1993. Each is an autonomous, separate legal entity. Section 10 of the HDS Act states as follows: "The objectives of every regional health authority, in carrying out its functions, shall be - (a) to promote the personal health of people; and (b) to promote the care or support for those in need of personal health services or disability services; and (c) to promote the independence of people with disabilities; and (d) to meet the Crown's objectives notified to it under section 8 of this Act - in accordance with, and to the extent enabled by its funding agreement." Section 8 sets out the objectives of the Crown as follows: "1 .. (a) The health status of the communities served. (b) The health services or disability services, or both, to be purchased. (c) The terms of access to these services. (d) The standard of those services. (e) The special needs of Maori and other communities. 6 An example of how those objectives have been specified by the Crown is set out in the 1996 Annual Report of the Northern Regional Health Authority. These include: . The Crown's primary objective is for the Northern Regional Health Authority to improve the health status, to improve, promote and protect the public health, and to promote the independence of people in the communities within the Northern Region through the purchase of health and disability services, by having regard to: (b) the particular characteristics, special needs, and cultural values of those communities (in particular Maori, Pacific people, and people with disabilities) ... 1.3(a) The Northern Regional Health Authority is obliged to purchase the following health and disability services; primary care services; pregnancy and childbirth services; dental health services; primary diagnostic and therapeutic support services; secondary and tertiary medical services; secondary and tertiary surgical services; mental health and alcohol and drug services; disability support services; public health services ..." Each Regional Health Authority provides a service to the Government (Ministry of Health). This service involves: "Monitoring the need for health services of people within a prescribed area. Purchasing health services for these people by way of a purchasing agreement. Monitoring the performance of the purchase agreements entered into." In performing these functions the RHA must meet certain objectives laid down by the Government which include the promotion of the personal health of the 7 people, promoting the care or support of those in need of personal health services and improving, promoting, and protecting public health. Funding for its purposes and objectives is provided by the Government under a funding agreement and from that funding it is required to purchase public health and disability services by means of purchase agreements according to the needs of the people within its particular region. An indication of the size of the responsibility of an RHA can be gained from the fact that in the 1996 year Northern RHA expected to receive a total of $1448.7 million from the Crown and other Government agencies to purchase personal, public and disability support services. An RHA does not itself provide health and disability support services. Its function is to determine the health needs of its region and included in that are the objectives specifically designated by the Crown and then it provides funds to service providers to purchase the various services that are required to meet those objectives and the health needs of the people in the region. An analysis of needs is undertaken and this is followed by a tendering process and then contracts with countless health providers are negotiated. Finally the various programmes which are then put in place are monitored by the RHA. The RHA's relationship with the Government is that the Government establishes guidelines and objectives and the RHA thereupon draws up a purchasing plan to meet those Government health objectives. The RHA is required to make an annual statement of intent on how its targets will be reached and it is required to publish an annual report of its performance. In terms of the meaning of "industrial activity" in the Employment Premium Regulations it could be said that the appellants's activities are the purchase of 8 health care services for the people of its region taking into account the needs of the people in the region and the Crown's notified objectives. Decision For the years 1993-94 the schedule to the regulations for the time being in force contained the following relevant classifications: Insurance institutions, services of ... Business administrative services Statutory bodies - activities not elsewhere described ... As was noted in the Noswell Holdings Ltd v ARCIC decision (1 BACK 402) if there is no doubt as to the applicability of a particular classification unit relating to the activity of the employer then that classification unit must apply and there is no discretion to consider any alternative. It is only where there is some doubt as to the appropriate description that a value judgment must be made. In terms of the regulations relevant to the 1993 and 1994 years there was no description which was sufficiently particular to cover the appellants's activities. It was counsel for the appellants' submission that, rather than its preferred classification being necessarily ideal, there were clear shortcomings in the classification determined by the respondent. The category of classification is category 43, being based on division 9 of the NZSIC (New Zealand Standard Industrial Classification). The list of industrial activities in the regulations is based on NZSIC. The NZSIC splits up industrial activities into economic divisions and these divisions were compressed into 27 premium classes which form the various classes into which the categories in the Schedule to the regulations fall. The class number is specified in the regulations. The category Statutory bodies - activities not elsewhere described falls within class 43. Under NZSIC class 43 includes Central Government Health Administration 9 (91014) which is described as "administration of Government policy regarding health." NZSIC describes "insurance institutions,-services of" as consisting of "the covering of life, medical, fire, marine, car and other general insurance risks in consideration of the payment of premiums." Group 8212 medical insurance is described as "the provision of medical, hospital and dental insurance, funeral benefits and the operation of benefit funds." Counsel for the appellant contends that this classification is more appropriate for the appellant as he contends that the appellant's functions are more akin to a private health insurer. I find that the appropriate classification for the appellants for the 1993 and 1994 years is quite clear cut with really little room for argument. That classification is that which is submitted by the respondent, namely, Statutory bodies - activities not elsewhere described. If one looks at that in conjunction with the NZSIC classifications and notes that it includes Government Health Administration which is described as "administration of Government policy regarding health" then that is more or less exactly what the appellants are required to do. There is no dispute that they are statutory bodies and sections 8 and 10 of the Act which creates them makes it quite clear that they are required to carry out Government policy and objectives regarding health. They are required to report to and are ordered by the Government in that regard and accordingly I find the classifications so made by the Corporation to be the appropriate ones. Turning now to the classifications for the 1995/96 years. These classifications under new regulations were based on the Australian and New Zealand Standard Industrial Classification (ANZSIC). Under the relevant employment premium regulations which came into force on the 1st of April 1995 and which adopted the ANZSIC classification system, the 10 relevant classification units were health insurance, business administrative services and central Government operation (not elsewhere classified). Insofar as the regulations which came into effect on the 1st of April 1996 these contained one alteration with a new classification of "Central Government Administration". The classifications Central Government Administration and Central Government Operation (not elsewhere classified) replaced the earlier statutory classification of statutory bodies - activities not elsewhere described. In terms of the 1995/96 regulations there is no specific description which covers the appellant's industrial activity and therefore, as counsel for the respondent submits, the activities must again come under the catch-all descriptions stated above for Government bodies. Counsel for the appellant submits that it is because of the words "Central Government" that this particular classification is not appropriate for the appellants as the description of "Central Government" is that of units mainly engaged in formulating and administering central Government policy. Counsel for the appellant submits that the activities of the appellants do not include being engaged in formulating and administering central Government policy, they have no hand in formulating policy and it is contended that it is arguable whether they "administer" Government policy. Counsel has based his argument on the descriptive passage "formulating and administering central Government policy." He submits that to come within that description both activities need to be present. Similarly he submits that in the exclusions to the description are "the management of commercial and business activities or activities other than Government administration which are included in classes appropriate to those activities." 11 Counsel submits that the term "business" is used in its wider sense to include any organisation which provides goods or services and it is contended that in this case services are provided by the appellants to the Government, health care providers and the public and therefore it is appropriate to describe them as a "business" under the above classification and that they are thereby excluded. Counsel for the respondent submits that the appellants are each a body of Central Government, as opposed to Local Government Bodies. The appellants are each one of four Government agencies which purchase health care services for the public. They are bound by s.10 of their Act to meet objectives notified to them by the Crown. The appellants are directly responsible for administering Government policy on health and that is stated as such in the documents provided by them in evidence. I find that the category submitted by the appellants of Health Insurance is similar to the earlier category of Insurance Institutions - services of and is again well astray of being descriptive of the activities of the appellants. The appellants are not in the business of providing health insurance or funeral benefits and I rule that it is not even close to being an appropriate description of the appellants's activities. Counsel for the appellant submitted that the appellants were in the business of managing the business of health and as such the fact of managing the business of health in their area is contended as bringing them outside the definition of "Central Government Administration". The appellants contend that in the alternative to Health Insurance the appropriate category for the appellants would be Business Administrative Services. The ANZSIC classification describes Business Administrative Services as employers "engaged in providing a range of services to support the operation of a business or businesses. The services provided are primary to classes in business services, property services, or finance and insurance services." 12 I agree with counsel for the respondent's submission that the appellants's activities do not involve them providing business administrative services to others. They could not be approached for such a service, rather they are statutory bodies whose role is to arrange and pay for publicly funded health and disability support services for the people of their region. Their role is quite distinct from that of the health care providers with whom they contract. It is the latter who provide the service to the public and carry the policy dictated by the RHA. Accordingly then I find that the description Business Administrative Services cannot be said to be a description of the appellants's industrial activity as determined by the nature of the goods or services produced or rendered. For the foregoing reasons the classifications determined respectively by the Review Officers for the two appellants are hereby confirmed and each of the appeals is dismissed. DATED at WELLINGTON this 29 -day of January 1997 Penthe M J Beattie District Court Judge Northreg.doc KD