Schlaadt v Accident Rehabilitation and Compensation Insurance Corporation

IN THE DISTRICT COURT HELD AT WELLINGTON Decision No. 25 7 /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 RHONDA JOAN SCHLAADT of Dunedin Appellant (Appeal No. DCA 244/98) AND ACCIDENT REHABILITATION AND COMPENSATION INSURANCE CORPORATION a body corporate duly constituted under the provisions of the said Act Respondent HEARING at DUNEDIN on the 3rd day of November 1998 APPEARANCES A J Logan for appellant P A McBride RESERVED JUDGMENT OF JUDGE A W MIDDLETON The appellant in these proceedings was injured in a helicopter accident in August 1993 while in United States of America. On her return to New Zealand the respondent granted her cover under section 9 of the Accident Rehabilitation and Compensation Insurance Act 1992. The appellant instituted proceedings in the United States for damages for personal injuries which was subsequently settled and the appellant was paid an undisclosed sum. The 2 respondent now seeks to recover from the appellant, pursuant to section 15 of the Act, the sum of $128,575.17, being the total amount of compensation paid to or on behalf of the appellant by the respondent. In June 1994 Mr Logan advised the respondent that he was acting for the appellant on her claim for the personal injuries suffered in the United States and requested information as to the amount of compensation the respondent had paid to the appellant and the position the respondent would take in relation to section 15 should the appellant be successful with her claim in America. The respondent subsequently advised the appellant that it proposed to recover the total compensation paid out by it to the appellant if and when her claim in America was successful. The appellant's solicitor raised various issues regarding the interpretation of section 15 as a result of which the respondent sought opinions from both the Crown Law office and from Messrs Simpson Grierson and Co, Solicitors. After numerous interchanges of correspondence and discussions as to the meaning of section 15, the respondent advised the appellant on 22 August 1997 that it proposed to recover the total net claim costs which amounted to $128,575.17 as a debt due to the respondent pursuant to section 15(3). The appellant applied for a review of that decision. In submissions to the Review Officer, Mr Logan challenged the interpretation of section 15 adopted by the respondent. In particular, he took issue with the interpretation of section 15(1) and (3). He submitted that subsection (1) is limited to the situation where no payment in a personal injury claim has been received as a result of a Court order or settlement. In contrast to that he submitted that subsection (3) dealt with the situation in which a claimant has received payment as a result of a personal injury claim. He submitted that when a claimant "has received" then if either: "treatment ... is required" or "is paid" or "is payable" then the respondent has the duty to give effect to either paragraph (a) or (b) of section 15(3). He submitted that under section 15(3)(a) when the payment is received the respondent must deduct from the cost of treatment the sum equivalent to the nett amount received by way of damages, compensation or settlement. He submitted that section 15(3)(b) is in the alternative and that if the respondent has not applied section 15(3)(a) but has made a payment, which should have been withheld under section 15(3)(a) that payment is recoverable from the claimant, up to the net amount received by the claimant in settlement. He submitted that the right of recovery under section 15(3)(b) does not arise unless the respondent has made a payment, subsequent to the receipt of the settlement fund by the claimant, which should have been withheld by the respondent under section 15(3)(a). He submitted that by virtue of the grammar used in section 15(3) it cannot have retrospective application of the right of recover. He submitted further that under the general law the respondent is not an insurer under a policy of insurance. The respondent did not indemnify the appellant under a contract of indemnity but has a statutory duty to provide assistance in accordance with entitlements under the Act. He submitted that there is no contract of indemnity upon which to base a right of subrogation. 3 The respondent's spokesperson at the review hearing relied on the opinion supplied by Messrs-Simpson Grierson in making his submissions. In the result, the Review Officer held: "1. the Corporation cannot rely on section 15(3) of the Act to recover the moneys paid to the appellant prior to the settlement of her personal injury claim; 2. under the general law the Corporation has a right of recovery from the appellant payments made by the Corporation to the appellant; 3. section 155(4) of the Act gives the power to the Corporation to sue as a company may; 4. the Corporation is entitled to be subrogationder the law of restitution to the funds of the appellant received in settlement of her claim in the United States; 5. that the appellant would be unjustly enriched at the expense of the Corporation if it could not recover the sum of $128,575.17 from her; 6. that up to the time of the settlement of the appellant's claim in the United States, it was understood by all parties that the appellant would be expected to repay the Corporation the moneys received from it prior to the settlement; 7. that by operation of the law of restitution the Corporation is entitled to repayment of that money; 8. there were no policy reasons to deny the Corporation the right to recover this money; 9. that the Corporation is entitled to suspend future payments to the appellant until the settlement moneys are depleted; and 10. the sum claimed by the Corporation should not be reduced proportionately to reflect the costs incurred by the appellant in obtaining settlement of the personal injury claim." It is against that decision which the appellant now appeals. Mr Logan provided me with extensive submissions along the lines of the submissions he had already made to the Review Officer. Mr Mcbride rejected the approach previously adopted by the respondent and submitted that the respondent's duties are set out in the Act which provides its own code and that a decision in this appeal rests entirely on the interpretation of section 15 rather than issues of insurance law or the general law. Mr Logan took issue with Mr McBride's approach in that it was different from the submissions made at the review hearing and no cross appeal had been filed. I do not consider that it was necessary for the respondent to file a cross appeal as once the appellant had lodged its appeal the Court has a wide discretion to consider all the issues put before the Review Officer and to make its own determination and, if it considers the decision of the Review Officer to be in error, to reverse that decision. I have spent some time considering the file and documentation contained in it from which it appears that the opinions provided to the respondent have led it away from its duty to act within the statutory confines of its own Act. This has had the result that the basic principles of the Act have been ignored by the introduction of abstruse arguments involving insurance law and the general law. I take the view that section 15 was included in the Act for the purpose of ensuring that a person who receives compensation in respect of a personal injury by accident for which he or she has cover under the Act and also receives compensation for the same personal injury in another jurisdiction must refund to the respondent such sums as the respondent has paid out in respect of that personal injury. Section 15, in so far as it applies to this appeal, states: " 15. Powers of Corporation where claimant has other remedies---(1) Where any treatment, service, rehabilitation, related transport, compensation, grant, or allowance is required to be provided or is paid or payable under this Act in respect of the personal injury of any person, and that person or the person to whom the treatment, service, rehabilitation, related transport, compensation, grant, or allowance is required to be provided or is paid or payable has the right to bring proceedings for damages in New Zealand or elsewhere in respect of that personal injury, the Corporation may require any person having a right to bring proceedings for damages in respect of the personal injury, at the option of that person, -- (a) To take all reasonable steps to enforce the right; or (b) To assign the right to, and do all other things necessary to enable the right to be enforced by, the Corporation within a reasonable period. (2) Nothing in subsection (1) of this section shall empower the Corporation to meet the costs of any action unless it has taken an assignment under paragraph (b) of that subsection. (3) Where any treatment, service, rehabilitation, related transport, compensation, grant, or allowance is required to be provided or is paid or payable under this Act in respect of the personal injury of any person, and that person or the person to whom the treatment, service, rehabilitation, related transport, is paid or payable, has received a sum of money by way of damages, compensation, or settlement of any claim in New Zealand or elsewhere in respect of that personal injury, the Corporation shall, and an exempt employer may, -- (a) Deduct from the cost of the treatment, service, rehabilitation, or related transport or from the compensation, grant, or allowance 5 payable, a sum equivalent to the net amount received by way of --..= =- damages, compensation, or settlement; or (b) Recover from the person as a debt due any amount that is in excess of the amount properly paid to the person, having regard to the provisions of this subsection." While Mr Logan has submitted that the respondent is not entitled to apply section 15(3)(b) because the provision only applies to compensation paid or payable by the respondent after the receipt of the settlement or damages and that as paragraphs (a) and (b) of section 15(3) are expressed in the alternative, the respondent is not entitled to make use of both options (emphasis mine). I do not agree with this interpretation of the section. Section 15(3) generally deals with the situation of a claimant who receives a payment in compensation for a claim outside the New Zealand jurisdiction. I agree with Mr Mcbride's submission that the section cannot be intended to limit the right of the respondent to recover as a debt due only the compensation it has provided or paid after the appellant has actually received the settlement or claim funds. As Mr Mcbride submitted that could have the consequence that if the settlement or damages was not received until after the respondent had paid out all the compensation or other entitlements to which the appellant may have been entitled under the Act then the appellant would receive all the damages or settlement monies without any necessity to account to the respondent for the compensation it had already paid out. While Mr Logan has submitted that the use of the words "is paid or payable" contemplates a present or future liability on the respondent at the time the damages or settlement monies are received, I do not consider that the words "is paid or payable" connotes a temporal significance. I consider that the words merely describe the respondent's statutory obligations which may be past, present or future. The respondent has paid the bulk of the figure now claimed by way of weekly compensation prior to the receipt of the settlement from America. It was the appellant's entitlement to receive those monies because they constituted compensation which is paid or payable to her under the Act in respect of her personal injury. I agree with Mr Mcbride's submission that those words do not have any temporal connotation. I agree with Mr McBride that while sections 15(3)(a) and 15(3)(b) are expressed to be in the alternative, it does not follow that the respondent is bound to apply one provision at the expense of the other. I consider that they constitute separate circumstances which provide powers to the respondent to recover compensation it has paid to the appellant. It could not be contemplated that the respondent would be placed in the position where it could recover only a portion of its liability under the Act even when the amount received in damages or settlement exceeded that liability. As I mentioned to Mr Logan at the commencement of the hearing, it appeared to me that section 15 was included in the Act to cover exactly the same situation as previously existed in common law injury claims prior to the advent of accident compensation legislation. That was the requirement that a successful claimant was required to ensure that all hospital and other expenses had to be refunded out of the 6 result of a successful claim. The provision of section 15 is to enable the respondent to recover from persons who have suffered personal injury by accident for which they have entitlements under the Act any funds paid out by the respondent when and if the claimant has a successful damages claim in another jurisdiction. I consider that it is a perfectly logical piece of legislation which does not involve any elaborate concept of insurance law. I consider that the Review Officer was misled in her approach by the conflicting opinions provided to the respondent and the arguments put forward on behalf of the appellant, all of which appear to overlook the fact that the Act provides its own code. However, and for different reasons, I agree with the Review Officer that the respondent is entitled to claim from the appellant, a full refund of its net claim costs amounting to $128,575.17. The appeal is dismissed. DATED at WELLINGTON this 4 th day of December 1998 owundduless A W Middleton District Court Judge dca244-98.doc (nr)