Fevin v Accident Rehabilitation and Compensation Insurance Corporation

IN THE DISTRICT COURT HELD AT AUCKLAND Decision No. ( S] 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 PETER FEVIN DCA 456/98 Appellant AND ACCIDENT REHABILITATION AND COMPENSATION INSURANCE CORPORATION a body corporate duly constituted under the provisions of the said Act Respondent HEARD on the 16th day of April 1999 APPEARANCES: Mr G Stringer, counsel for appellant Mr D Tui, counsel for respondent RESERVED JUDGMENT OF JUDGE M J BEATTIE The issue in this appeal is whether the appellant is entitled to have an overpayment of weekly compensation remitted in accordance with the provisions of section 77(2) of the Act. 2 Background On 20 January 1992 the appellant suffered injuries to his neck and back when he fell backwards onto a boat trailer. At the time of this accident he was aged 50 and was employed at Kerikeri as a security guard. The appellant's injuries were such that he was entitled to weekly compensation and an initial assessment was made based on his weekly earnings as a security guard. The amount of compensation so assessed was $466.98 and that amount less tax was paid to the appellant commencing from 27 January 1992. Subsequently the respondent received details of the appellant's earnings for the previous financial year which indicated that he was self-employed and his income from that source was $59,285.71. On the basis of that information the respondent reassessed the appellant's weekly compensation and increased it to $912.08 per week and commenced making payment at that rate from 18 March 1992, together with arrears, back to 27 January 1992. It was subsequently ascertained by the respondent that whilst the appellant had been in self-employment, that self-employment had ceased and that he was working as an employee at the date of the accident and that the initial assessment of weekly compensation which had been made was in fact the correct amount. By letter dated 10 June 1992 the respondent wrote to the appellant advising him that the reassessment which had been made, based on his self-employment income was incorrect and that as he was not self-employed at the date of his accident, the earnings as an employee were the relevant earnings and that on that basis weekly compensation must return to the previous amount of $466.98. The appellant sought a review of that decision and instructed solicitors to represent him for same. The decision of the Review Officer delivered on 27 November 1992 was to the effect that the Corporation's decision to assess him for weekly compensation on the basis of his earnings as an employee was correct. The appellant filed a notice of appeal against that review decision and that appeal was considered by 3 the Accident Compensation Appeal Authority which delivered a decision on 7 March 1994 dismissing the appeal. Throughout this period the appellant continued to receive weekly compensation at the higher rate. It is acknowledged by the respondent that following receipt of the Appeal Authority's decision and following the return of the file from head office to the appropriate branch office, that branch office, by oversight, failed to adjust the quantum of the appellant's weekly compensation back to the correct amount of $466.98. The file shows that the appellant did have ongoing contact with the respondent regarding other entitlements. In September 1994 the file was transferred to Papakura as the appellant had moved to that area and in early 1995 he purchased a property there. On 15 June 1998 the Corporation conducted an audit of the appellant's claim and it came to the notice of a Corporation officer that the Appeal Authority's decision of March 1994 had never been given effect. A file note indicates that the appellant was contacted by telephone and advised that his weekly compensation would be reduced forthwith. The note states that the appellant did not seem surprised at being contacted. The respondent calculated the amount of the overpayment made between the period 27 January 1992 and 12 June 1998, at a sum amounting to $93,101.73. In a letter dated 24 June 1998 the respondent advised the appellant that it would be seeking recovery of that sum and would commence receiving payments of same by a deduction of $158.00 per week from his ongoing weekly compensation. In July 1998 the appellant, through his solicitors sought the respondent to exercise its discretion under section 77(2) to remit the amount of the debt. 4 Before giving its decision the respondent sought a statement of the appellant's financial means and this was provided. It disclosed that he owned a mortgage free property valued at $175,000, a motor vehicle valued at $4,000, a boat valued at $6,000 and horses valued at $8,000. He listed his liabilities as overdraft $1,400, bank loan $5,000, private loan $1,400. The appellant's request for remission of the debt was considered by the respondent's head office but its decision was that the appellant could not satisfy the criteria of section 77(2) and this was formally advised to the appellant on 28 July 1998. The appellant sought a review of that decision. Prior to the hearing of that review the appellant submitted a valuation of the property in which he had a half share, that value being given as between $400,000 and $420,000 and the value of his motor vehicle was stated as being $3,500. The appellant also submitted an affidavit setting forth the circumstances under which he contended he was entitled to remission of the debt. The appellant stated in this affidavit that he did not receive the Appeal Authority's decision until September 1994. He said that it had been incorrectly addressed by his former solicitor. He further stated that his solicitor had advised him that any change in his weekly entitlement as a result of the decision would be preceded by written notification from the Corporation and of the date of the commencement of that change. He further stated that at about the time of the decision there had been media publicity regarding the inability of the Corporation to reduce weekly compensation of a claimant where in so doing the claimant's lifestyle would be considerably diminished. He stated that this publicity, together with the fact that he had not been notified of a reduction led him to conclude that the ACC developments that had been reported in the media had a bearing on his case that his weekly entitlement was to remain unchanged. He stated that he relocated to Auckland in 1994 and purchased a property but he said he would have purchased a property with a lower value and retained some of his capital if he had known his weekly entitlement would not continue at the high rate. He further stated that in reliance on that higher rate he purchased a number of horses, which he would not have done so otherwise as he would not have been able to afford to maintain them on the lesser income. He finally stated that he borrowed $5,000 from the National Bank on the basis of his then weekly income. At the review hearing the matters stated above were given as the basis of the appellant's case but in his decision the Review Officer ruled that he was not satisfied that the appellant had received payments in good faith, nor was it inequitable for the appellant to make repayment. ---- - Relevant statutory provision Section 77(2) of the Act states: (2) 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 the payment that it would be inequitable to require repayment. Submissions Mr Stringer, counsel for the appellant submitted that the appellant satisfied the criteria required of section 77(2). He submitted that the appellant had not contributed to the error of the overpayment, that he had received the amount paid in good faith and that he had altered his position in reliance on the validity of those payments. Counsel submitted that the appellant's good faith is established by the fact that he did not receive any correspondence from the Corporation indicating that payments would alter as a consequence of the Appeal Authority's decision. Furthermore those overpayments continued for a number of years which, counsel contends, reinforced the factor of good faith. Counsel submitted that the appellant had reasonable grounds to conclude that he would continue to receive the greater amount. 6 Counsel further submitted that the appellant had altered his position in reliance on the validity of the payments in that he had invested in horses and the maintenance of these could only be met from the level of income he was receiving. He submitted that the substantial investment in horses satisfies the test. Counsel indicated that the appellant was not relying on the purchase cost of the horses, simply the ongoing maintenance of them. Finally counsel submitted that it would be inequitable to require the appellant to repay, having regard to the amount of the debt and of the effect that that repayment would have on his financial resources. Mr Tui, counsel for the respondent, identified two distinct periods which he contended might require separate considerations of the three-test requirements of section 77(2). It should be noted that counsel for the appellant accepted that there were two periods which involved separate considerations for each. Counsel submitted that the first period was from January 1992 to September 1994, that is when the appellant received advice of the Appeal Authority's decision that his appeal had been dismissed. The second period was from September 1994 to June 1998 when the overpayment was discovered by the respondent and the appellant was notified of same. Dealing with the first period, counsel submitted that the respondent accepts that the appellant did not contribute to the occurrence of the overpayment. Counsel further conceded that the appellant would be accepted as receiving the overpayment during this period in good faith, even though counsel contended that the appellant would be on notice that if he was not successful on review and then on appeal, that those overpayments would need to be repaid. Counsel submitted that the appellant had not established that for this period he had altered his position in reliance on the payments. The evidence is that the appellant 7 simply applied his weekly compensation to normal living and in those circumstances that is not an "altered" position. Counsel submitted that if any horses had been purchased as part of his hobby in this period, then that was a capital expenditure and a financial benefit which was only available by virtue of a higher level of weekly compensation. If those horses could not be maintained they could be sold. Counsel submitted that it would not be inequitable to require repayment as the appellant was aware since June 1992 that the respondent considered that the amount the appellant ought to have received was a lesser sum and that he would know that in the event of his appeal being unsuccessful he would be called upon to repay. Counsel submitted that the appellant ought not to benefit from receiving a benefit which he was not entitled to merely by commencing and maintaining Court proceedings. Counsel accepts that for the second period the appellant did not contribute to the error but counsel submits that the appellant did not receive the payments in good faith in this period. Counsel submitted that from receipt of the Appeal Authority's decision the appellant was on notice that he was only entitled to earnings related compensation of $466.98 per week. He ought to have known that he was not entitled to the higher sum and that if he was in doubt as to the circumstances he ought to have contacted the respondent to have the matter clarified. Counsel notes that the appellant was having ongoing contact with the respondent on other matters. Counsel submits that the decision of this Court in Royal (141/98) is relevant. Counsel submits that insofar as the altering of position is concerned, the acquisition of assets represents an enrichment of the appellant's position and that at the time he purchased the property and raised the loan and purchased the horses, he was aware that his correct entitlement was for a lesser sum and that the validity of the payment he was receiving must be in question. 8 Counsel submits that the equities do not favour the appellant. He closed his eyes to the truth of the matter. Furthermore, counsel contends, that the appellant has enriched himself due to this additional income over the relevant period. Decision The issue in this appeal is governed by the provisions of section 77(2) of the Act. This provision requires consideration of three factors, all of which must be present before a claimant can become entitled to be considered for the exercise of the Corporation's discretion in his or her favour. Those three factors are: I That the error was not intentionally contributed to by the recipient; II That the amount was received in good faith; III That the recipient has so altered his or her position in reliance on the validity of the payment that it would be inequitable to require repayment. In the present case there is no dispute that the first factor is present at all stages and therefore this decision is confined to a consideration of factors II and III. I agree with counsel for the respondent's submission that it is necessary to consider those two criteria over two time periods and to determine whether the overpayments for one or both periods ought to be remitted. I propose to deal with this appeal in that fashion. First period : 27 January 1992 to September 1994 This period runs from the date the overpayments commenced to the date immediately prior to the date the appellant says he received notification of the Appeal Authority's decision. Insofar as this period is concerned the respondent would accept that the appellant received the overpayments in good faith and I find as a matter of fact and law that this is the case. The mere fact that the appellant would have been on notice, as it were, that in the event of his review and/or appeal being unsuccessful there would be an overpayment situation, would not alter the fact that he could consider himself entitled 9 to receive those payments if indeed the respondent elected to continue making the payments during this review/appeal period at the higher rate. Thus although the appellant might be expected to have received these payments during this period with some understanding that he may be required to account for any sum overpaid, that would not affect the situation that he did receive the payment in good faith. The altering of position relied upon by the appellant during this period is the purchase of an unspecified number of horses, but it would only be a few. Counsel for the appellant in his submissions advised that the appellant was not contending that he had a reliance on the validity of the payment for the purchase price of the horses, but rather for their ongoing maintenance. It was not contended that he purchased the horses from the overpayment, but rather from his capital. The remainder of the overpayment was simply expended on normal living so it can be said that the only altering of position was the cost of maintenance of the horses. No evidence was given as to what that cost of maintenance was but I find that this does not affect the central issue. The purchase of the horses was a capital item, they represented an asset to the appellant. I find that this was a different circumstance than the committing of oneself to a contractual financial commitment which was reliant on receipt of a particular income stream for it to be serviced. It must be remembered that at any time the appellant might expect his entitlement to compensation to cease and therefore it must be expected that if capital assets have been acquired which are too costly to maintain if that compensation were to cease, then the appellant would be expected to dispose of those assets to such extent as they were unable to be maintained. This is the position I find here and if indeed there was an altering of position, then I find that it cannot be found to be inequitable to require repayment as the asset that was acquired could be sold to satisfy the overpayment or could be sold to eliminate the 10 detriment. In the circumstances as I have found them to be I find that the appellant has not establish grounds for consideration of remission of that part of the overpayment which occurred in that first period. Second period : September 1994 to 12 June 1998 This period covers the time from when the appellant received the decision of the Accident Compensation Appeal Authority through his solicitors, down to the date when the respondent became aware of the overpayment and contacted the appellant and ceased that overpayment. There can be no doubt that the decision of the Appeal Authority is quite clear and succinct. The appellant's appeal was dismissed. From that decision he must be taken to know that his true entitlement to weekly compensation was $466.98 per week. The appellant stated in evidence that his solicitor told him that he would receive written notification of the change in the amount of his weekly compensation. He says that that fact was coupled with an understanding he had obtained from a TV programme where he says it was stated that the Corporation could not just drop the amount of compensation and affect a recipient's standard of living. I take it that the appellant suggests that despite having only an entitlement to $466.00 per week, nevertheless he could expect to continue receiving $912.00 per week because the Corporation would not wish to affect his lifestyle. Counsel for the respondent submitted that such an explanation stretches the bounds of credulity and I concur with that observation. The evidence discloses that the appellant was in contact with the Corporation on other matters during this period and it would have been open to him to enquire about the Appeal Authority's decision and as to whether or when the payments of his weekly compensation were going to be reduced in accordance with that decision. Looking at this matter in the best possible light for the appellant I find that he closed his eyes to the reality of the situation and elected not to make any enquiry about the matter. In those circumstances I find that a state of good faith cannot be said to exist. 11 It was suggested by counsel for the appellant that the fact that the overpayment went on for a period of nearly four years reinforced the submission that the appellant received the payments in good faith. I find that this is not the case where the appellant has made no enquiry as to why the payments continued at a greater level than could have been expected, and particularly so where there were ample opportunities during the course of dealings with the respondent for him to do so. Counsel for the appellant's submission would have had some merit if the appellant had in fact mentioned the matter to the respondent, and it was documented, but despite that the payments at the greater rate had continued. That would be a different circumstance. For the avoidance of doubt I find that the appellant can set no store by his statement that he got some understanding from a TV programme. If indeed there had been some such notion created by such a TV programme, then it was still incumbent on the appellant, I find, to make an enquiry with the respondent to see whether he may have been in that category that he may have understood that programme to be referring to. The crux of the matter is that the appellant made no enquiry whatsoever and as I have said, he closed his eyes to the realities of the situation. In those circumstances I find that a situation of good faith cannot be established. The finding that the payments were not made in good faith is sufficient to dispose of the second period but in the event that the finding of an absence of good faith should not be maintained, then I now consider the question of the altering of position. The evidence of the appellant was that in early 1995 he purchased a property in South Auckland and commenced his horse breeding hobby. Again he is not contending the acquisition of the property or the acquisition of horses was the altering of position. He does submit that the maintenance of the horses and the servicing of a $5,000 bank loan which he took out during this period constituted an altering of position. 12 The findings I have already made in respect of the first period regarding the horses I find equally applies in this second period. Insofar as the bank loan is concerned I find that the amount of this loan is modest and whilst it may be said to be an altering of position, I find that in the circumstances of the appellant's asset and liability position, it cannot be said to be inequitable to require him to repay. The balancing of equities requires the Court to consider whether a recipient's altered position and from which he/she would suffer an injustice if called upon to repay outweighs the injustice of denying the claimant the money to which it is entitled. In the facts of this present case I do not find that the entering into of a $5,000 bank loan where the appellant has assets in excess of $200,000 is such a financial commitment that the injustice of requiring the repayment of the debt to the respondent is outweighed by the injustice of the appellant having incurred that indebtedness of $5,000. Finally I endorse a submission made by counsel for the respondent that when the appellant took out this loan in March 1998 he ought to have been aware that he was not entitled to receive weekly compensation at the rate he was receiving it and in those circumstances he was not so much relying on the validity of the payments when he entered into that loan transaction, but rather he was reliant on the hope that the respondent would continue to overlook its error. From every perspective I find that this appellant cannot satisfy the criteria of section 77(2) and as such there is no basis for him to be entitled to a remission of the amount of the overpayment which did occur. For the foregoing reasons therefore this appeal must be dismissed. DATED at WELLINGTON this 15 day of June 1999 Dasthe M J Beattie District Court Judge 456.98Fevin.doc