Graham v Accident Rehabilitation and Compensation Insurance Corporation

IN THE DISTRICT COURT HELD AT WELLINGTON Decision No. 155/99 UNDER The Accident Rehabilitation and Compensation Insurance Act 1992 AND IN THE MATTER of an appeal pursuant to section 91 of the Act BETWEEN ROBERT GRAHAM of Whangarei Appellant (Appeal No. DCA 34/99) AND ACCIDENT REHABILITATION AND COMPENSATION INSURANCE CORPORATION a body corporate duly constituted under the provisions of the said Act Respondent HEARING at WHANGAREI on the 27th day of May 1999 APPEARANCE/COUNSEL CL Cook for appellant D Fotiades for respondent RESERVED JUDGMENT OF JUDGE A W MIDDLETON The issue in this appeal is the respondent's decision of 4 May 1998 to decline the appellant's request for a self-employment financial grant pursuant to section 22 of the Accident Rehabilitation and Compensation Insurance Act 1992. The appellant is aged 49 and is a Carpenter by trade. In July 1983 he injured his left ankle as a result of which he was granted cover by the respondent. In 1986 he 2 suffered a fracture to his right ankle in a motorcycle accident for which he has received various entitlements including weekly compensation. Following a report of 26 November 1996 from Mr C H Hooker, an Orthopaedic Surgeon, the respondent accepted that the appellant was fit for a range of light work but could not work again as a Carpenter. In pursuit of rehabilitation the respondent assessed the appellant as suitable to attend a small business course at Northland Polytechnic to assist him to undertake a career as a self-employed joiner. In November 1997 the appellant was referred by the respondent to Mr E Angelo, a Chartered Accountant to examine the details of his proposed business preparations and for the preparation of a business plan. In January 1998 the appellant was referred to Mr P Beer, a Business Consultant for assistance in completing a curriculum vitae and a business plan. Mr Beer reported to the respondent that the appellant had failed to prepare and present to him a cashflow plan as a result of which he could not finalise details for a complete business plan. The appellant's Case Manager then wrote to the appellant reminding him of his responsibilities to take action towards his own rehabilitation. As a result of this the appellant signed a new rehabilitation plan on 26 February 1996 with the objective that the appellant was to "exit scheme via self employment, manufacturing outdoor furniture for sale, by 30.09.98." The rehabilitation plan provided two costings. Plan A envisaged a cost of $31,235.81 after the provision by the respondent of initial start-up funds of $16,657. Plan B envisaged a cost of $33,516.96 which involved the appellant commencing conventional rehabilitation under which the respondent required vocational assistance, curriculum vitae preparation, job placement referral/ trial and weekly compensation. The Case Manager in a memorandum on the file dated 25 February 1998 stated: 'I am satisfied with Mr Graham's business plan. I am satisfied that he has the necessary skills and expertise to conduct his business and generate income.' Mr Angelo provided a report on 8 April 1998 in which he concluded: "During my two interviews with Mr Graham I am happy that he has firstly completed a well thought through business plan and has attempted to show that he wishes to seek financial independence from ACC by commencing the business. Overall I do support his endeavours in this regard but my final recommendation must be couched in such a way to make sure that Mr Graham is supported correctly. In his own interests I believe it would be wise for him to do much more work on the proposal in terms of producing samples and actually going out into the market place with those samples to ascertain whether the actual products will sell. I know this is difficult without the necessary tools to make the products, but that is where I believe there could be a compromise in terms of providing Mr Graham at least cost to ACC with the tools necessary to build up the samples and then go out into the market place and show ACC that firstly they were saleable and secondly that his production estimates are reasonable. I believe it would be unwise to set up Mr Graham in business by providing him with 3 $16,000.00 plus for the operation without first making sure that the business has a good chance of working. On the information provided I believe it would be against Mr Graham's interests to set him up in this business without further analysis of the market and that the products will actually sell." On 16 April 1998 the appellant's Case Manager noted that he was not prepared to recommend that the appellant be supplied with tools and machinery to produce samples because he considered that there was no guarantee of income. After receiving that advice the respondent issued its decision letter on 4 May 1998 and stated: "We have now completely investigated your request for a self employed financial grant under the provisions of Section 22 of the Accident Rehabilitation and Compensation Insurance Act 1992. At the outset we agreed to investigate the possibility of you setting up in self employment as a carpenter producing a range of marketable goods for sale on the general market. You had initially asked for $5,000.00 to set up in self employment and Erc Angelo, our accounting adviser, has set some goals for you to achieve with respect to completing a business plan that clearly explained your objectives, your product, your marketing plan and cash flow projections. You completed your small business course at the end of 1997, at which time we had agreed to meet and go over your plans and investigate: (a) Self employment as an option, or some other option such as, (b) Employment (we discussed you obtaining your certificate in adult teaching so that you could obtain employment as a tutor). The key elements that were necessary for you to obtain approval for this plan were: (a) The marketability of your product. ( 6 ) Your potential market. ( c ) Your commitment and ability to produce. (d) Your cash flow prediction. I was concerned at the time that it took you to get your business plan together, and this concern is reflected in my letter to you of 4 February 1998. Once your had actually finalised your plan, it was submitted to our business manager who, initially in agreement with the idea, thought that Erc Angelo's final endorsement of the business plan would be good. As you know Erc Angelo had some doubts that you would be able to meet the production output in order to achieve financial independence. He was also concerned about the marketability of your product range, for which you had conducted no tests. 4 Erc suggested that we provide you with the cash to purchase tools to produce your prototypes which may enable you to secure a market, as a compromise. It is the decision of the Corporation that your business plan will not be funded for the following reasons: a ) You have no product other than a concept. You have no market lined up and therefore too much risk exists. (c ) We doubt your ability to produce the required amount of units for sale irrespective of the lack of market for the products. The Corporation will not consider the compromise that is suggested by Erc Angelo due to the risk of no return on investment, i.e. reduction in weekly compensation." The appellant applied for a review of that decision. The Review Officer concluded her decision by stating: "Ultimately, the applicant must be able to demonstrate the cost-effectiveness of his proposed venture. I agree with the Corporation that this has not been established. Accordingly, the Corporation's decision of 4 May 1998 is confirmed and the application is unsuccessful." It is against that decision which the appellant now appeals. The issues in this appeal falls to be decided under section 22 of the Act which states: " 22. Objective of vocational rehabilitation - the objective of vocational rehabilitation is to assist - (a) Those persons who are entitled to compensation for loss of earnings under Section 38, 39 or 44 of this Act; and b) Those persons who are entitled to compensation for loss of potential earning capacity under Section 45 or 46 of this Act; and (c) Those persons who have cover under this Act and are likely, without vocational rehabilitation, to be entitled to compensation for loss of earnings or loss of potential earning capacity under this ActOO to maintain employment, obtain employment or, in all other circumstances, to have a capacity for work (as defined in Section 51(2) of this Act)." And section 23 which states: "Provision of or payment for vocational rehabilitation - ) Subject to subsection (ii) of this Section and to any direction for any time being in force under Section 159 of this Act, the Corporation may make any provision of or payment for vocational rehabilitation if it considers appropriate in 5 the circumstances and the provision or payment is expected by the Corporation to be cost effective. (ii) The Corporation may at a its discretion provide or meet the costs of any vocational rehabilitation for the minimum period necessary to meet the objectives set out in Section 22 of this Act, but in no case shall such provision be made or costs be met in respect of any vocational rehabilitation that exceeds a period of three years in total, which need not be consecutive. (iii) The three year period referred to in subsection (ii) of this Section does not include any period of vocational rehabilitation provided before the commencement of Section 3 of the Accident Rehabilitation and Compensation Insurance Amendment Act (2) 1995." Ms Cook submitted that in distinguishing the decision in Waldie v ARCIC (183/98) the Review Officer had reached her decision on a wrong principle and / or had taken into account wrong considerations. She submitted that the proper approach is to consider the issue on the basis of the criteria included in the respondent's current policy for the exercise of its discretion in regard to rehabilitation into self- employment. The policy directions are: "(i) the injury precludes the claimant from returning to pre-injury employment and alternative work options are limited due to location and employment factors; (it) the claimant is able to cope with the long term physical demands of the occupation involve in the proposed self employment venture; (iii) the claimant has a proven work history of self employment; (iv) the claimant has demonstrated the business skills needed to manage the self employment venture (completion of a Small Business Course is not itself acceptable); (0 ) the claimant has a business plan which has been satisfactorily reviewed." Ms Cook submitted that the appellant's injury precludes him from undertaking employment which is dependent on the economic requirements of an employer and that his only option is self-employment. She submitted that the appellant has been on weekly compensation for a considerable time and Mr Angelo's assessment is that he could become independent which brings him within the first two objectives of the respondent's policy. Ms Cook submitted that in regard to the third statement of policy the appellant in Waldie who had not previously been self-employed was not debarred from considering self-employment as an option nor does it appear to have been a disentitling factor in the investigations now undertaken by the respondent. That in regard to the fourth criteria of the policy the appellant is placed in a "catch 22" 6 position because as he has not previously been in self-employment he cannot demonstrate his business skills. However, his technical skills and the proposed business plan have been recognised by Mr Angelo as being worthy of support. Ms Cook submitted further that the appellant has expended $2,578 in order to build a workshop which demonstrates that has made a substantial financial contribution but without further assistance he cannot buy tools in order to produce the goods to test the market in order to ascertain whether or not his self-employed option is viable. Ms Cook submitted that Mr Angelo had offered a suitable compromise proposal which warrants serious consideration by the respondent. Ms Fotiades submitted that while the Waldie appeal was decided on its own particular facts, the finding in that case was that the respondent had failed to take into account or enquire into the matters affected by the policy criteria (iii) and (iv). She submitted that this appellant's situation differed from that in Waldie in that in this case the respondent has considered all the relevant matters which affect the criteria and has carried out a proper financial exercise in order to ascertain whether there is a real prospect of it being cost effective and further that the Accountant in this case is not wholly supportive. Ms Fotiades submitted further that the appellant has not previously been self-employed and therefore lacks the necessary experience. She submitted further that while the appellant has completed a small business course this does not by itself demonstrate that the acquisition of suitable business skills to manage a self-employed venture. It is quite clear that the appellant's only viable option towards rehabilitation and for cessation of long term reliance on a weekly compensation is to undertake self- employment. He has undertaken a small business course because of his lack of previous experience in management of a business of his own. While this may not necessarily demonstrate an ability to manage he did impress Mr Angelo with his dedication. Mr Angelo concluded that the provision of samples of the proposed furniture would assist in a consideration of the future viability of the business. However, this places the appellant in the "catch 22" position referred to by Ms Cook in that without some initial assistance he is unable to produce samples in order to check the market. While Ms Fotiades has submitted that this case can be distinguished from the position of the appellant in Waldie because here the respondent had endeavoured to meet the requirements of its criteria (iii) and (iv), I consider that it is of interest to note the statement of His Honour Judge Beattie in Waldie where he stated "The fact that the Appellant has not got a proven work history of self employment or that he has previously been able to demonstrate business skills needed to manage the self employment venture meant that he was in a "catch 22" situation in many respects. Having the considered the matter and looked through the Corporation's file, I find that it has really done nothing to treat this particular Appellant on his merits. In his report Mr Barraclough was supportive and he considered the forecast and assumptions for the business were realistic.' 7 I consider that it was open to the respondent after having received the very comprehensive and supportive report from Mr Angelo to have taken the additional step and approve the grant of limited assistance proposed in Plan A so that samples of the appellant's work could be produced in order to test the market before the full programme is undertaken. I consider that this appellant is in a very similar position to that of the appellant in Waldie because there is a supportive report from the Accountant who has gone into the prospects with meticulous care and is satisfied that the appellant has the necessary ability to carry out the proposed self- employment option. His recommendation which the respondent appears to have ignored is the proposal in Plan A to provide limited assistance in order to test the market. I consider that this is an opportunity which the respondent should have made available to the appellant. However, the issue is a discretionary one for the decision of the respondent and is not one which the Court can make. Accordingly, the file will be returned to the respondent to enable it to reconsider its decision in the light of my findings. There will be costs to the appellant of $800. DATED at WELLINGTON this / 7th day of June 1999 A W Middleton District Court Judge dca34-99.doc (nr)