Mitchell and others v Accident Compensation Corporation

IN THE DISTRICT COURT HELD AT WELLINGTON Decision No. 089/2004 UNDER The Injury Prevention, Rehabilitation, and Compensation Act 2001 AND IN THE MATTER of an appeal against a review decision under Section 145 of the Act BETWEEN PAMELA MITCHELL, THOMAS AND ZARA LAWTON re ESTATE OF GUY MASON LAWTON Appellant (Appeal No. AI 204/03) AND ACCIDENT COMPENSATION CORPORATION a body corporate duly constituted under the provisions of the said Act Respondent HEARING at PALMERSTON NORTH on 24 February 2004 APPEARANCES/COUNSEL Carla na Nagara for appellant Mr M K Johnston for respondent RESERVED JUDGMENT OF JUDGE J D HOLE Introduction 1. At issue is the decision of the respondent dated 21 January 2003 calculating the weekly compensation payable to the appellant. This was calculated on the basis that the deceased, immediately before his fatal injury, had earnings solely as a shareholder-employee arising out of his private professional practice as an oral maxillofacial surgeon. The Corporation failed to grant the appellant additional weekly compensation claiming that the deceased was not in permanent employment with MidCentral Health immediately before his https://openlawnz-my.sharepoint.com/personal/andrew_openlaw_nz/Documents/ACC Decisions (DC appeals)/2004/089-2004.doc acm 2 death. This appeal concerns this latter aspect of the decision and the subsequent review decision upholding it. 2. In accordance with clause 66 and clause 70 of Schedule 1 of the Injury Prevention, Rehabilitation, and Compensation Act 2001, the Corporation is liable to pay weekly compensation to the appellant as calculated in accordance with clauses 32 to 45 of the Schedule. These clauses refer to eligibility to weekly compensation for loss of earnings and provide the assessments to be undertaken for varying types of employment. 3. Clause 41 of the schedule allows for aggregation of more than one amount of weekly earnings from different employment situations. The appellant has submitted that earnings should be assessed as an employee in permanent employment under clause 33 and as a shareholder-employer under clause 39. 4. The Corporation has accepted that the deceased derived earnings as a shareholder-employee and this is the basis upon which entitlement was assessed. Relevant Legislation 5. (i) Section 6 of the Act states that: “earner” – (a) means a natural person who engages in employment, whether or not as an employee; and (b) includes a person to whom clause 43 or clause 44 of Schedule 1 applies. “earnings” means – (a) earnings as an employee: (b) earnings as a self-employed person: (c) earnings as a shareholder-employee… “employee” means a natural person who receives, or is entitled to receive, - (a) any amount that is treated as income from employment, as defined in paragraph (a) of the definition of “income from employment” in section OB 1 of the Income Tax Act 1994; or 3 (b) any salary, wages, or other gross income to which section OB 2(2) of the Income Tax Act 1994 applies. “employment” – (a) means work engaged in or carried out for the purposes of pecuniary gain or profit; and (b) in the case of an employee, includes a period of paid leave, other than paid leave on the termination of employment. (ii) Section 9 defines “earnings as an employee”. It reads: (i) Earnings as an employee, in relation to any person and any income year, means all source deduction payments of the person for the income year. (iii) Clause 33 Schedule 1 of the Act states: 33. Weekly earnings if earner had earnings as an employee in permanent employment immediately before incapacity commenced: application of clause 34 – (1) Clause 34 applies to a claimant who – (a) was an earner immediately before his or her incapacity commenced; and (b) was in permanent employment at that time; and (c) had earnings as an employee from that permanent employment at that time. (2) If the claimant had permanent employment with more than 1 employer at that time, the weekly earnings of the claimant, in respect of each permanent employer he or she had at that time, are as calculated separately under clause 34 and aggregated under clause 41. (3) For the purposes of this clause and clause 34, the claimant is regarded as having been in permanent employment if, in the opinion of the Corporation, he or she would have continued to receive earnings from that employment for a continuous period of more than 12 months after the date on which his or her incapacity commenced, if he or she had not suffered the personal injury. 4 Issues 6. The Corporation did not dispute: (a) that the deceased was an earner immediately before his death; (b) that the appellant is entitled to weekly compensation based on the deceased’s earnings as a shareholder-employee under clause 39 of Schedule 1; and (c) if the Court decides that the deceased did have earnings as an employee in employment immediately before his death (which the Corporation does not concede) the appellant was entitled to obtain an aggregate calculation under clause 41 of Schedule 1 (with earnings being calculated under clause 36 of Schedule 1). 7. The Corporation contends that the appellant is not entitled to weekly compensation for the deceased’s earnings as an employee in permanent in employment under clause 33 of Schedule 1 because: (a) the deceased did not have earnings as an employee immediately before his death; and (b) the deceased was not in permanent employment with MidCentral Health immediately before his death. 8. These, then, are the two issues which need to be determined. Did the deceased have earnings as an employee immediately before his death? 9. Clause 33(1)(a) of Schedule 1 provides that, in order to qualify for weekly compensation under clause 33 of Schedule 1, the appellant must establish that the deceased had earnings as an employee immediately before his fatal injury. 10. Section 6 of the Act provides that in order to be an employee the deceased must have been receiving, or have been entitled to receive, wages. 11. At the time of his death, the deceased was owed wages for four hours of work which he had done on 26 November 2002. In January 2003, the appellant 5 received payment for these services in the sum of $400.00 (before PAYE). PAYE was deducted from the gross amount. 12. In argument, s 9 was not referred to. Had it been considered, it would have been apparent that the nett payment of $333.14 paid to the estate of the deceased constitutes a source deduction payment of the deceased for the income year. Accordingly, the answer to this question is in the affirmative. Was the deceased in permanent employment? 13. Clause 33(3) defines the nature of permanent employment. To be in permanent employment, the appellant must establish that the deceased would have continued to receive earnings from MidCentral Health for a continuous period of more than 12 months from his death. 14. The deceased was employed by MidCentral Health up to his resignation on 4 August 2002. What his relationship with MidCentral Health was after that date is the issue. 15. There are four revealing pieces of evidence: (a) A letter written by MidCentral Health dated 14 January 2003 to the respondent, which reads: “I write to confirm that Mr Guy Lawton worked at MidCentral Health as an Oral Maxillofacial Surgeon, appointed on Amy secondment in January 1996. I can verify that Mr Lawton resigned from MidCentral Health on 4 August 2002 and that he and I had an arrangement whereby we would access his services on a causal [sic] basis from time to time as workloads dictated. He availed himself to us on 26 November 2002 to assist, on an honorary basis, our Surgeons and it was anticipated that a casual arrangement would be arrived at as workloads presented or case acuity changed”. Possibly the letter may be interpreted as meaning that after his resignation on 4 August 2002 the deceased and MidCentral Health had an arrangement whereby he would work for MidCentral Health on a casual basis from time to time as workloads dictated. To suggest that this was an honorary position (viz, unpaid) is nonsense, as 6 (b) On 5 February 2003 MidCentral Health paid to his estate a gross sum of $400.00 in respect of the work undertaken by him on 26 November 2002. From this sum, PAYE was deducted by MidCentral Health. (c) At the review hearing, the deceased’s widow gave evidence of the arrangement with MidCentral Health. At page 21 of the transcript, she is recorded as stating: “ … We were relocating to Taranaki and Guy had always stated that there was – there seemed to be a very high incidence of carcinoma, cancer, in the Taranaki region, though we were never sure what that was for. He was referring those patients through to the head and neck clinic which is operated out of the oncology department at MidCentral Health and because of Guy's technical expertise in the head and neck region they wanted him, and had stated quite clearly that they wanted - and like when I say ‘they’, it was the surgeons who had wanted him to avail himself to work on his own patients because they didn’t want to do it and then send them back. Guy was certainly under the expectation that there would be a number of people that he would have to come across to assist or take the lead role in operating. And on 26 November that was just the first of those”. The transcript goes on to record that he was effectively on call to MidCentral Health and that he was keen to maintain his links with that organisation. (d) At page 25 of the transcript, the deceased’s widow stated: “They tried to renegotiate the contract so that he would still be able to do surgical practice at MidCentral without the on-call but there was a bit of argy-bargy going on about the on-call, so it was reduced to working on Taranaki-based patients at MidCentral”. 16. In McConkey v ACC (122/01) Judge Beattie stated, when discussing the concept of “permanent employment”: “It is the nature of the employment that is important and in this case I have no difficulty in finding that the type of employment that the appellant was engaging in was one which would be of a permanent nature providing he proved himself to be the right person. That proviso I find is really no different from any other proviso and may be spelt out or simply be implied. However, for the purposes of section 40(2A) I find that those provisos do not apply and that once it is established that the nature of the job is one that is permanent as opposed to casual or fixed term or temporary then that satisfies the test of permanency”. In van Huysen v ACC (135/2003), Judge Beattie noted: 7 “I find that permanency does not require a notion of full-time employment but simply that there is an effective employer/employee relationship which each party can call on”. In Te Amo v Allianz New Zealand Limited (206/2002), Judge Beattie had to contend with a similar situation to that which prevails here. In that case, he recognised that it was possible for a casual arrangement to also constitute permanent employment. He stated: “I consider that the phrase ‘for a continuous period’ of more than 12 months means an unbroken period and means a fixed time for hours of work on a weekly basis. It need not be full-time but it would need to be structured and settled with the employer and the employee understanding their respective rights and obligations. In the case of the appellant, I find that such a situation cannot be the case. His employment was subject to availability and was of no guarantee as to hours or days of work. He had no claim on the employer for any minimum work period and he was totally at the whim of the employer as to when and if he worked. To my mind that is the antithesis of permanent employment, where there is a structured arrangement, not necessarily needing to be in writing, but nevertheless each party knowing that there is a continuous employment arrangement of specified times or days of a week”. 17. In this case, the arrangement had not been finalised. As the deceased’s widow stated at the review hearing, the family was in the process of relocating to Taranaki. Significantly, she noted that it was the surgeons who were anxious for the deceased to avail himself to work at MidCentral Health on his own patients. There undoubtedly was an expectation that he would have to operate on a number of his patients at MidCentral Health. I accept that the work undertaken on 26 November came within that category. 18. However, there was no certainty as to the hours or days of work which he might undertake for MidCentral Health. But the situation is not the same as in Te Amo, where the claimant was “at the whim of the employer as to when and if he worked”. In this situation, it seems clear that the arrangement was sufficiently specific to the extent that if the deceased’s own patients were at MidCentral Health, then he would be required to operate on them. 19. In Te Amo, Judge Beattie stated: “The purpose of the Act of the distinction to be drawn between employees in permanent employment and employees not in permanent 8 employment for the purposes of calculating weekly compensation, is to give the employee, who is considered to be a permanent employee, the proper recognition of his pre-accident earnings for the period that he has been so permanently employed, particularly if his permanent employment is only of recent times. The purpose of weekly compensation is to compensate an injured employee during the period he is unable to earn by reason of incapacity. It is intended to compensate him for lost earnings. For this reason, the legislature has seen fit to give the benefit to a permanent employee who it can safely be said would in the future have continued to earn his income from that employment had he not been injured, and that it is right and proper that he be compensated in line with the income from that employment that he has lost because of his injury. Contrasted with that is the calculation to be made for a non-permanent employee who is a person who may be a casual employee or a person who is there on a short term contract. In the case of that person, a crystal ball would be much cloudier and it could not be confidently predicted that that person would in the future continue to earn the type of income that he was receiving at the date of injury, particularly for the next 12 months. So the Act then takes an historical look at the person’s track record of employment for the preceding 52 weeks and says that he/she is entitled to receive weekly compensation calculated by dividing the income that that person had received over the last 52 weeks, whether in fact they had worked for all of those 52 weeks. The divisor must in every case be 52, rather than just the number of weeks worked. Thus the future is intended to reflect the past. Having regard to the purpose of the provisions for calculations of weekly compensation entitlement, I find that this appellant must clearly fall into the category of a non permanent employee, as there can be no prediction of what his income would be likely to be into the future because of the nature of his employment, and therefore his entitlement must be looked at by reference to his past earnings records”. 20. I agree with the decisions of Judge Beattie, which I have just cited. In considering whether or not a particular claimant is in permanent employment, the purpose of the legislation is relevant. Using Judge Beattie’s terminology, the question arises as to whether it can safely be said that the deceased would in the future have continued to earn his income from his employment, had he not died. If the answer to that question is in the affirmative, then it is right and proper that the appellant be compensated in line with the income from that employment that the deceased lost because of his death. 21. Whilst I accept that it was unknown, at the time of the deceased’s death, exactly how much work he would have undertaken for MidCentral Health, in 9 all other respects, the essential ingredients of the arrangement were in place. It was a verbal arrangement which provided: (a) a basis upon which remuneration was to be fixed; (b) that the deceased would work at MidCentral Health with his Taranaki patients; (c) that he would do so when there was sufficient work which required him to do so; and (d) that it was intended to last indefinitely. Conclusion 22. Therefore I am satisfied: (a) that the deceased did have earnings as an employee immediately before his death; and (b) that the deceased was in permanent employment and that he would have continued to receive earnings from MidCentral Health for a continuous period of more than 12 months from his death. 23. For the above reasons, the appeal is allowed. There are costs awarded in favour of the appellant in the sum of $1,500.00. Dated at WELLINGTON this 2nd day of April 2004 at 4 am/pm J D HOLE District Court Judge