Stockan v Accident Compensation Corporation

IN THE DISTRICT COURT HELD AT NAPIER WELLINGTON REGISTRY Decision No. 262 /2007 Al 485/06 UNDER The Injury Prevention, Rehabilitation, and Compensation Act 2001 AND IN THE MATTER of an appeal pursuant by RONALD R STOCKAN Appellant AND ACCIDENT COMPENSATION CORPORATION Respondent HEARD at NAPIER on 17 July 2007 DATE OF THIS DECISION 14 December 2007 APPEARANCES/COUNSEL Mr J Grove, advocate for appellant Mr J R Sumner, counsel for ACC DECISION OF JUDGE P F BARBER The Issue [1] At issue is the ACC's 22 June 2006 decision declining to pay interest to the appellant on backdated weekly compensation. The question comes down to when ACC had sufficient information to be able to calculate and pay out arrears of compensation. These came to $224,924.41 over the period 2/9/96 to 31/3/02. ACC says it didn't obtain the necessary information from WINZ until 20/12/05. That led to a deduction of $131,880.68. It did not receive the appellant's tax code information until 17/01/06. The appellant's rights had capitalised on 9/11/05 when ACC obtained appropriate medical evidence. [2] In a 22 June 2006 letter to the appellant, the respondent (ACC) confirmed that the appellant, in November 2005, had requested it to consider the payment of interest on arrears of weekly compensation. In particular, the respondent advised: ".....In your case the necessary information to enable payment to be made was made available to ACC on 20 December 2005 through WINZ. You were 2 advised of the amount payable to you on 21 December 2005, and requested to provide confirmation of a tax rate. ACC declines to pay interest on the weekly compensation arrears which were paid to you, as ACC met the time frame specified of payment within one month of all information being received....... [3] The issue is whether ACC is liable to pay interest on any part of the arrears payment. Background [4] The appellant suffered an injury to his lumbar spine on 8 November 1989 while employed as a small engine mechanic. The respondent paid Earnings Related Compensation in respect of this injury from 15 November 1989 until 1 February 1995 when he commenced employment at Chelmswood Manor in Taupo as a groundsman/handyman. [5] The appellant suffered a further back injury on 2 April 1995 and applied for weekly compensation in respect of that injury. The respondent paid weekly compensation from 10 April 1995 to 22 September 1996 based on the appellant's earnings at Chelmswood Manor. 6] Then ACC learnt that the appellant may not have declared all his earnings, and ACC commenced an investigation of his work activities. On 2 September 1996 the respondent stopped the appellant's weekly compensation on the basis that his work activities had demonstrated that he was able to return to his pre-injury employment at Chelmswood Manor; that he did not take an active part in his own rehabilitation following his injury; he did not provide information to the respondent when reasonably requested to; and he withheld information required by the respondent. [7] The appellant did not take this decision on Review. ACC prosecuted the appellant in the District Court for knowingly and fraudulently receiving compensation while in receipt of earnings gained by employment. The appellant was convicted of that in the Hastings District Court on 20 April 1998. [8] On 1 December 2003, the appellant applied for weekly compensation and provided a medical certificate showing incapacity from 1 December 2003. The respondent investigated the appellant's request for reinstatement of weekly compensation and ultimately determined, by 23 September 2004 decision, that the appellant was not entitled to weekly compensation from 1 December 2003 as he was not an earner nor in receipt of earnings at that time. [9] The appellant applied for a review of this decision. In an 8 June 2005 Review Decision, the Review Officer concluded that the matter should be referred back to the respondent for consideration on whether the appellant had been "continuously incapacitated" since 1989 from his pre-incapacity employment as a small engine mechanic. [10] The Review Officer noted that, although ACC had previously decided on 2 September 1996 that the appellant was no longer incapacitated from his employment as a groundsman/handyman, that decision related to the appellant's employment prior to injury on 2 April 1995 and did not address the appellant's ability to return to 3 the employment he was engaged in before the accident in 1989. The Review Officer also noted that employment as a small engine mechanic was quite different from employment as a groundsman/ handyman. The Review Officer upheld ACC's argument that the appellant was unable to challenge the decision regarding incapacity from 2 September 1996 based on the 2 April 1995 injury, but found that the question of incapacity from 1989 was different and, therefore, referred the matter back to ACC for further investigation. [11] On 23 August 2005, the matter was called before Judge Beattie for a Directions Hearing. ACC was directed to consider afresh whether the appellant remained incapacitated from the 1989 injury. On 9 November 2005 ACC issued a decision agreeing to provide weekly compensation and backdating it to 1 February 1995, the appellant's last day of payment. [12] In his 20 June 2005 notice of appeal, the appellant claimed breaches of ss. 138 and 140 of the Injury Prevention Rehabilitation and Compensation Act 2001 which require reviewers to act independently, comply with the principles of natural justice and exercise due diligence in decision-making. That appeal was heard by Judge Ongley in the District Court at Napier on 30 August 2006 and, by his 29 September 2006 decision, he dismissed the appeal. [13] In a 17 November 2005 letter, the appellant sought the payment of compound interest "on the backdated entitlement from 1" February 1995". [14] By 18 November 2005 letter, the respondent agreed to make an advance payment of $6,000.00 (nett) to the appellant prior to the finalising his overall entitlements. [15] On 14 November 2005, ACC had provided information to WINZ to facilitate the WINZ calculation of the amount to be repaid on behalf of the appellant. The information from WINZ seems to have been obtained by ACC on 20 December 2005. [16] By a 21 December 2005 letter, ACC wrote to the appellant confirming the calculation of his backdated weekly compensation and advised that the total amount before tax was $93,043.73, with the earlier advance of $6,000.00 (nett) being recovered from that amount. Further, the respondent advised: ".. ...Weekly compensation is taxed in the year which the payment is received rather than the tax year to which the payment relates. As this is a large payment and ACC does not know Mr Stockan's full circumstances for this tax year, we may not deduct enough tax based on the tax code he has previously given us. This could mean there is shortfall in tax that he will need to pay Inland Revenue at the end of the tax year...... ......Once you have determined which tax rate is applicable for Mr Stockan, please complete and return the attached form. This form lists the tax options available to Mr Stockan in relation to his backdated weekly compensation." [17] On 21 December 2005 at 5.00 pm, the respondent's local branch manager met with Mr Grove and the appellant regarding a request for an advance of a further $14,000.00 (nett). In particular, his file note dated 21 December 2005 at 5.13 pm notes: 4 "Met with MrGrove and Mr Stockan as branch manager unable to - they have requested an advance of $14,000.00 (nett) as Mr Stockan needs to seek advice re correct tax code to be applied - this has been agreed to. This advance will be withheld from arrears once finally paid." That $14,000.00 was agreed and paid by the respondent on 10 January 2006. [18] On 17 January 2006, the appellant contacted the respondent's office and advised that he had spoken to IRD regarding his tax code. It appears that the appellant called in to the respondent's offices and executed confirmation of his tax code ST, which he verified and confirmed with IRD. [19] On 17 January 2006 the respondent arranged payment of the appellant's backdated weekly compensation less the advances already made. By 18 January 2006 letter, the respondent advised the appellant that it had actioned his weekly compensation arrears, and that the WINZ reimbursement had been deducted together with the $20,000.00 advance. Accordingly, the respondent paid the sum of $35,651.32 to the appellant's bank account available on 19 January 2006 [20] For the appellant, Mr Grove refers to the compensation arrears being $224,924.41 as at 21/12/05 for the period 2/9/96 to 13/11/05 and to $131,880.68 being repayable to WINZ. That left a balance due to the appellant of $93,043.73 but before deduction of income tax. [21] On 30 June 2006 the appellant filed an application for review alleging: "ACC was aware in September 1996 of the amount of weekly compensation due and is therefore liable to pay interest from the original date of entitlement." [22] In a 23 November 2006 review decision, Review Officer M H Donovan held: I find that Mr Stockan is not entitled to interest on the arrears of weekly compensation. ACC made the payment within one month of having all the necessary information. In particular I refer here to the WINZ and IRD details. Although Mr Stockan has argued that ACC had all the information it required in September 1996, I do not accept that submission. At that point ACC had not determined continuous incapacity from his employment as a small engine mechanic under the 1989 claim. That date has no bearing on this matter therefore. .. I am satisfied that ACC was required to deduct the WINZ benefits received by Mr Stockan, and therefore the details of that were "necessary information" to make the payment. On balance, I am also satisfied that ACC required a special IRD tax code before making the payment to Mr Stockan. Once it received that information, it released the sums due to Mr Stockan within two days. [23] The appellant filed a notice of appeal on or about 14 December 2006 and pleads that: "The reviewer failed to correctly apply section 72 of the Accident Insurance Act 1992." . .. .. 5 Legislation [24] Section 114 of the Injury Prevention, Rehabilitation, and Compensation Act 2001 ("the IPRC Act") states: "[114] Payment of interest when Corporation makes late payment of weekly compensation (1) The Corporation is liable to pay interest on any payment of weekly compensation to which the claimant is entitled, if the Corporation has not made the payment within 1 month after the Corporation has received all information necessary to enable the Corporation to calculate and make the payment. (2) The Corporation is liable to pay the interest: (a) at the rate for the time being prescribed by, or for the purposes of, section 87 of the Judicature Act 1908; and (b) from the date on which payment should have been made to the date on which it is made." [25] Section 114 of the IPRC Act was preceded by s. 101 in the 1998 Act and s.72 of the 1992 Act. [26] Section 114 of the IPRC Act and its predecessor sections confirm that the respondent is liable to pay the interest at the rate for the time being prescribed by, or for the purposes of s.87 of the Judicature Act 1908. Currently that is 712%. Apart from s.114 of the IPRC Act 2001, there is no legislative provision empowering the award of the interest in this case. Case Law [27] In Reckin v Accident Compensation Corporation (Al 265/2006) Judge Beattie dealt with an appeal where an appellant contended that interest on the backdated weekly compensation should accrue as from September 1991, as the date of commencement of the appellant's incapacity from the injury for which weekly compensation was known to be payable. In particular, Judge Beattie held: "[34] This is not a case where the appellant had a right to interest accruing as from August 1991, as the appellant had not established an entitlement to weekly compensation at that time, that entitlement not being determined until 5 September 2002 by the Review Decision of that date. ... [36] It cannot be disputed that following the decision of Justice Gendall in Wardle (Wellington HC AP 134/02) such details of monies due to WINZ was necessary information under the 1998 Act, although it had not been under the 1992 Act. The 2001 Act continued that same mandatory requirement of repayment to WINZ as had been the case under the 1998 Act. [37] One of the arguments advanced for the appellant in the Robinson appeal to the Court of Appeal, was that s.72 of the 1992 Act, being the interest provision in that Act, applied, as it was the Act in force when the right to weekly compensation was found to have first commenced. ... 6 [39] In the present case it can be said that the appellant's rights crystallised on 5 September 2002, and as such, the claim for interest which was made in March 2003, was governed by the 2001 Act. ... [43] This is the position in the present case, where, although the appellant has been found to have an entitlement to weekly compensation that runs from August 1992, that date must be distinguished from the date upon which any interest entitlement may arise. That interest entitlement is covered by s. 114 of the Act, which states that an interest entitlement arises after one month from the respondent having all information necessary, and for however long thereafter payment of the weekly compensation is delayed." Analysis [28] By a 9 November 2005 decision, ACC agreed (on the evidence then available) o meet payment of weekly compensation to the appellant backdated to 1 February 1995. That was the date (referred to above) when compensation ceased regarding his accident of 8/11/89 because he had commenced work on 1/02/95. [29] The respondent then investigated the appellant's backdated weekly compensation entitlements together with the [compound] interest claimed. Nine days following the respondent's agreement to backdate the appellant's weekly compensation, it wrote to WINZ seeking information regarding any amounts that would be required to be repaid to WINZ in accordance with its obligations [30] The appellant was advised of the receipt of the "necessary information" by a 21 December 2005 letter from ACC together with the amount to be paid subject to confirmation of advice regarding the appellant's tax code. This information was subsequently provided by the appellant and payment was made within two days of receipt of this information, and within one month of the receipt of the WINZ information. [31] in Lawrence 316/04) Judge Beattie held that "all information necessary" to enable the respondent to calculate and make the payment consisted of: "Confirmation that the appellant continued to be incapacitated for the period subsequent to cancellation. Details of any income received ... so that abatement provisions could be brought into play. Were there any periods of unemployment during which the appellant was in receipt of any WINZ benefits." [32] I agree with Judge Beattie's approach. [33] The provision of information by WINZ is necessary information to enable the respondent to calculate and make payment to the appellant (refer Wardel v Accident Rehabilitation and Compensation Insurance Corporation per Gendall J, HC Wellington, AP 134/02, 18 October 2002), and Lawrence (supra). 7 [34] Notwithstanding any issues surrounding the receipt of information regarding the appellant's tax code, payment to the appellant could not be made prior to receipt of the WINZ information. The payment was, in any event, made within one month of that information being made available. The IPRC Act does not provide for interest to be paid from the date of the commencement of the entitlement, nor does it allow for a retrospective deeming of receipt of all necessary information to some earlier date than actual receipt of that information. [35] Also, the information provided by IRD was necessary information required by the respondent to ensure that the appropriate tax deduction was made from the payment prior to forwarding the balance to the appellant. The deduction of tax is mandatory under the Income Tax Act 2004. The respondent had already made two moderate advances to the appellant to assist him during the period where the information was being sought and the payment calculations finalised. [36] The appellant's notice of appeal refers to s.72 of the 1992 Act. The reason for this may arise out of the effect of Warde! (supra) and the amendments to the governing legislation, in particular the 1998 Act and the 2001 Act. For example, details of monies due to WINZ were necessary information under the 1998 Act and emain so under the 2001 Act, although that had not been a mandatory obligation under the 1992 Act, refer Reckin (supra) paragraph 36 [37] However, although it has been established that the appellant has an entitlement to weekly compensation found to have arisen from February 1995, that entitlement did not crystallise until the said 9 November 2005 decision of ACC. The 2001 Act then applied not the 1992 Act. In accordance with Judge Beattie's findings in Reckin (supra), while the appellant has been found to have an entitlement to weekly compensation from February 1995, that date must be distinguished from the date upon which any interest entitlements may arise. The interest entitlement is covered by s. 114 of the 2001 Act. That states an interest entitlement only arises after one month from the respondent having all information necessary, and for however long thereafter payment of weekly compensation is delayed. [38] In this case, ACC did not have all necessary information until 17 January 2006 (when tax code information was supplied by the appellant). It made payment to the appellant within 48 hours of that date. There was no late payment of weekly compensation and the respondent is therefore not required or liable to pay interest. (39] For the sake of completeness, the medical evidence required by ACC to consider whether or not the appellant was in fact incapacitated from his employment (as he was in 1989) was not obtained until July 2005. Following receipt of that information, investigations were immediately commenced into whether or not there was further medical evidence in support of the appellant's incapacity. The respondent's 9 November 2005 decision confirmed the appellant's incapacity and agreed to backdate payment of weekly compensations subject to the receipt of all necessary information. Although further information was required from WINZ and RD, the respondent made a payment "without prejudice" to its legal position. While this payment was not legally necessary, I agree that it demonstrates the good faith with which the respondent has dealt with the appellant throughout its consideration of this matter. [40] The issue of the type of interest payable where the respondent makes a late payment of weekly compensation has been considered in numerous cases, most 8 notably by our Court of Appeal in Robinson v ACC [2006] BCL 976 (13/10/06; CA15/05). It is now settled law that neither the Judicature Act 1908 nor the IPRC Act or its predecessor Acts enable or authorise the payment of compound interest by the respondent on late payments of weekly compensation. The legal position regarding the payment of interest by ACC on late payment of weekly compensation is clear. The respondent is only permitted to pay simple interest, not compound interest, on late payments of weekly compensation. There is no provision under the respondent's empowering legislation for the payment of compound interest on late payments of weekly compensation as claimed by the appellant. Conclusion [41] The respondent made payment of the respondent's backdated weekly compensation within one month of receipt of all necessary information in terms of sensibly assessing that. Accordingly, ACC is not empowered by statute to make payment of interest. [42] I agree with the Reviewer. The appeal is hereby dismissed. Judge P F Barber District Court Judge WELLINGTON Ai 485-06.doc(aw) - 2 x- * -..-- - -........ . . . -- .. .. . .-.