Sanford (South Island) Limited v Accident Rehabilitation and Compensation Insurance Corporation

IN THE DISTRICT COURT Decision No. 160 /97 HELD AT CHRISTCHURCH 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 SANFORD (SOUTH ISLAND) LIMITED Appellant (Appeal No. DCA 25/96) AND ACCIDENT REHABILITATION AND COMPENSATION INSURANCE CORPORATION a body corporate duly constituted under the provisions of the said Act Respondent HEARD on the 26th day of June 1997. APPEARANCES K G Smith for appellant Clare Taylor for respondent DECISION OF JUDGE D A ONGLEY The question in this appeal concerns attribution of premium loading from one employer to another in respect of an activity that was transferred as a going concern before the commencement of the Accident Rehabilitation and Compensation Insurance Act 1992. In March 1991 the Sanford Group purchased from Skeggs Seafoods Ltd plant, vessels and quota in connection with a fishing operation carried on at Nelson. Skeggs Seafoods Ltd continued to operate in the fishing industry in Nelson and other parts of New Zealand. At the time of the purchase the experience rating regime introduced in the 1992 Act was not in operation, and probably could not have been anticipated by the parties in the ordinary course of events. In due course, the Corporation adjusted the appellant's employer premium with qualifying claims referable to three employees - 2- amounting to a total value in the 1993 year of $52, 107.16. The accidents had occurred to these three employees in May 1988 and September 1989, well before the acquisition of the business by the appellant and well before the commencement of the 1992 Act. The appellant argues that the provisions of the Act should be interpreted in a way that does not result in a retrospective application and contends that such an interpretation is available and is consistent with the evident purpose and intention of Part VII of the Accident Rehabilitation and Compensation Insurance Act 1992 and the Regulations thereunder. Further, the appellant submits that the Corporation has failed to exercise a discretion, or has exercised a discretion on wrong principles in attributing the costs of these claims to the appellant. Part VII of the 1992 Act relates to the Employers' Account. For the purposes of financing the provision of compensation in respect of certain kinds of personal injury, the Corporation derives its funds from premiums payable by employers or self- employed persons. The funds are to be applied to claims in respect of three categories of injury, that is to say, work injury and non-work injury (other than motor vehicle injury) suffered by an earner or after 1 April 1974 and before 1 July 1992, work injury suffered on or after 1 July 1992 and personal injury by gradual process, disease or infection, covered by s 11 of the 1992 Act. Under s 101 of the Act, employers are required to pay a basic premium at rates to be prescribed. Section 102 contains a similar provision for self-employed persons. Industry classes may be classified under s 103 of the Act for the purposes of setting premiums payable under ss 101 and 102. Section 104 states that the basic premium may be adjusted by reference to the accident experience of or attributed to that employer. Adjustment to basic premium is to be imposed by premium loading, and the basis of premium loading is prescribed by regulations made under the authority of s 104. Section 104(4)(c) provides for regulations for the attribution of claims and costs of such claims associated with one employer to another employer where all or part of an activity carried on by that first employer has subsequently been carried on by that other employer, or where the two employers are or were related or connected. The Experience Rating Regulations 1993 lays down a calculation for premium loading for small employers under reg 4 and large employers under reg 5. The premium loading is calculated according to a formula. The formula for large employers includes "factor g" which is: All, or such portion as the Corporation in its discretion may determined, of the qualifying payments (if any) made by the Corporation in the premium liability year pursuant to the qualifying claims (if any) attributable, or deemed to be attributable, to the large employer in the premium liability year. Qualifying payments are defined in Regulation 2 as follows: "Qualifying payment", in relation to any employer, means any payment made by the Corporation that the Corporation is able to associate with a qualifying claim attributable, or deemed to be attributable, to that employer, where that payment is - 3. made not later than the last day of the 4th premium liability year following the premium liability year in which the claim date falls; but does not include any payment made by the Corporation to the extent that it is recoverable under section 114 of the 1982 Act or section 77 of the Act: Qualifying claims are defined as follows: "Qualifying claim", in relation to an employer, means, subject to regulation 6 of these regulations, a work injury claim lodged in respect of employment with that employer and accepted by the Corporation (such a qualifying claim is referred to in these regulations as being a qualifying claim attributable to that employer): Work injury claim is defined: "Work injury claim" means - (a) A work injury claim to which section 65 (1) of the Act refers; and (b) A claim made under the 1982 Act in relation to personal injury by accident arising out of and in the course of employment- but does not include a claim which relates to any personal injury by accident or work injury which is a subsequent work injury: Reattribution of qualifying claims is governed by reg 6 as follows: 6. Reattribution of claims to another employer - (1) The purpose of this regulation is to enable the Corporation to attribute as many qualifying claims associated with one employer as possible to another employer where all or part of an activity or another activity carried on by that first employer has subsequently been carried on by that other employer or where the 2 employers are or were related or connected, to the intent that the financial costs to the Corporation of such claims are borne by that other employer and not by all employers generally. (2) Notwithstanding that a qualifying claim is, or is deemed to be, attributable to an employer or, in the case of a company which is a member of a specified group would, but for the application of regulation 12 (1) (c) of these regulations, be or be deemed to be attributable to that employer (referred to in this regulation as the first employer), the Corporation may deem that qualifying claim to be attributable to one or more other employers, or to such other employers and the first employer (together referred to in this regulation as the second employer), with effect from such time as the Corporation may specify, if the qualifying claim related to a personal injury by accident or work injury that occurred in the course of employment which - (a) Was in respect of an activity carried on by the first employer where all or part of that activity has been transferred as a going concern to the second employer; . ...... The literal meanings of the definitions of qualifying claim and qualifying payment bring into account payments associated with past claims up to the end of the fourth premium liability year following the premium liability year in which the claim date fell. The 1988 claims would be assessable for qualifying payments in the 1993 premium year but that would be the last year in which they would be used for calculation of "factor g". The literal meaning of those provisions of the regulations - 4. introduces a historical factor in calculation of premium loading. The appellant submits that the inclusion of a historical factor, where it involves a liability for events that were out of the control of the appellant, amounts to giving retrospective effect to the 1992 Act. The appellant submits that is a consequence that is to be avoided if the regulations can be interpreted in a manner that avoids retrospective effect. Appellant's submissions The submissions of the appellant may be broadly summarised as follows: 1. The appellant was not in a position to introduce conditions into the purchase of the fishing operation in February 1991 in order to avoid the consequence of legislation yet to be passed. The appellant is now unable to seek any redress from Skeggs. 2. Section 5(d) of the Acts Interpretation Act 1924 provides that, for purposes of interpretation, the law shall be considered as always speaking, and whenever any matter or thing is expressed in the present tense the same shall be applied to the circumstances as they arise, so that effect may be given to each Act and every part thereof according to its spirit, true intent, and meaning. The appellant refers also to s 5(j) of the Acts Interpretation Act and to the overriding canon of interpretation of giving the words used their natural and ordinary meaning 3. The presumption against retrospectivity is stated in Bennion Statutory Interpretation Second Edition p 214: "Unless the contrary intention appears, an enactment is presumed not to be intended to have a retrospective operation." The commentary in Bennion states: 'The essential idea of a legal system is that current law should govern current activities. Elsewhere in this work a particular Act is likened to a floodlight switched on or off, and the general body of law to the circumambient air. Clumsy though these images are, they show the inappropriateness of retrospective laws. If we do something today, we feel that the law applying to it should be the law in force today, not tomorrow's backward adjustment of it. Such, we believe, is the nature of law. Dislike of ex post facto law is enshrined of the United States Constitution and in the constitutions of many American States, which forbid it. The true principle is that lex prospicit non respicit (law looks forward not back). As Willes J said, retrospective legislation is 'contrary to the general principle that legislation by which the conduct of mankind is to be regulated ought, when introduced for the first time, to deal with future acts, and ought not to change the character of past transactions carried on upon the fate of the then existing law'. Retrospectivity is artificial, deeming a thing to be what it was not. Artificiality and make-believe are generally repugnant to law as the servant of human welfare. So it follows that the courts apply the general presumption that an enactment is not intended to have retrospective effect. As always, the power of Parliament to produce such an effect where it wishes to do so is nevertheless undoubted. The general presumption, which therefore applies only unless the contrary intention appears, is stated in Maxwell on the Interpretation of Statutes in the following emphatic terms: 'It is a fundamental rule of English law that no statute shall be - 5 - construed to have a retrospective operation unless such a construction appears very clearly in the terms of the Act, or arises by necessary and distinct implication."" Bennion describes Maxwell's rule as too restrictive and suggests there may be circumstances where retrospective effect was intended, but if it occurs it should be confined to "as narrow a compass as will accord with the legislative intention". In Secretary of State for Social Security v Tunnicliffe [1991] 2 All ER 712 Staughton LJ said: "In my judgment the true principle is that Parliament is presumed not have intended to alter the law applicable to past events and transactions in a manner which is unfair to those concerned in them, unless a contrary intention appears. It is not simply a question of classifying an enactment as retrospective or not retrospective. Rather it may well be a matter of degree - the greater the unfairness, the more it is to be expected that Parliament will make it clear if that is intended." 4. The appellant submitted that the 1992 Act effects a difference in the statutory regime which had obtained under the earlier Accident Compensation Act. There is no language in the Act that indicates that in order to effect a change in the funding scheme an obligation is imposed based on past events. Sections 100 to 104 are not retrospective but prospective. The basic premium is a premium established under the 1992 Act and is a new obligation. Section 104(1) prescribes a discretionary adjustment by reference to the accident experience of or attributable to an employer, and it uses the word "may" which can be interpreted to avoid retrospective effect. The premium has to be struck under the new Act before it can be adjusted. 5. Adjustment by reference to accident experience of another employer from whom the activity has been inherited may well involve increased costs in the nature of a penalty. . Parliament can be presumed to use the clearest language in imposing any penalty, let alone one attaching to past transactions. 6. Section 104 was amended on 26 June 1993 and the amendment contained a specific provision that it was deemed to have come into force on 1 July 1992. No such express wording is used to indicate that past events may be assessed in calculation of premium loading 7. The philosophy relating to accident experience is, in part, to provide motivation for employers to provide a safe workplace and to engage in rehabilitation of injured employees. Part of the philosophy of the Act is to penalise irresponsible employers and reward good employers. That object will be subverted if the accident experience of a poor employer is attributed to a good employer, which the appellant alleges to be the consequence of the Corporation's decision in this case. 8. Regulation 6(1) should be read in a manner that accords with s 104. Otherwise, reg 6(1) appears to dictate a purpose of attaching costs to an employer in any circumstances, even when the result may be unfair. - 6. 9. Regulation 1(2) of the Experience Rating Regulations states that they shall be deemed to have come into force on 1 April 1993 and shall apply to any basic premium paid or payable on or after that date under the Act. It is submitted that a prospective intention is indicated by that regulation, and parties to a commercial transaction are entitled to take into account that the regulations will not begin to have effect until 1 April 1993. Regulations 6(2) of the Experience Rating Regulations gives the Corporation the power to attribute a qualifying claim to one or more other employers than the employer to which the claim is deemed to be attributable. Regulation 6(2) states that the power may be exercised with effect from such time as the Corporation may specify. It is submitted that the regulation exceeds the power given under s 104 in conferring on the Corporation a discretion to attribute a qualifying claim to a date prior to the commencement of the Act: Daymond v Southwest Wharf Authority [1976] AC 609. 10. Lastly, the appellant submits that the Corporation should have exercised a discretion taking into account the relative excellence of the appellant's history of work accidents and avoid an unfair attribution. Respondent's submissions It is unnecessary to outline the respondent's submissions in detail, but it will suffice to mention the following: 1. That the scheme of the employer's account is to establish "pay as you go" premiums which are sufficient to fund compensation paid during the premium year in respect of past employment related accidents. It is implicit, that accident history must be taken into account from the commencement. Otherwise, it would follow that the account will not be properly funded until a new accident history is built up by each employer under the new Act. There is nothing in the language of the statute to indicate that intention. The language of s 104(4)(c) clearly contemplated that the attribution of claims would be done by relating them to an activity, so that they would be attributed to another employer where the activity has passed from one employer to another. Regulation 6(2) implements the scheme of the Act in that respect. 2. The Act does not indicate any intention that reattribution should not apply where the first employer is still in business or where the first employer should continue to carry certain claims by reason of fairness. 3. The rewarding of good employers and penalising of bad employers is not the paramount consideration in relation to s 104, the focus of which is on the financial costs to the Corporation of employment related claims and the fairer sharing of those costs by insuring, where possible, that the costs continue to be funded by premiums from the activity from which the injury arose. 4. Section 104 and Regulation 6 refer to an activity carried on by one employer that has subsequently been carried on by another employer. The provision does not refer to the date on which the activity moved from one employer to another. - 7- 5. A statutory regulation is retrospective: "... if it takes away or imposes a vested right acquired under existing laws, or creates a new obligation, or imposes a new duty, or attaches a new disability in relation to events already passed. Yewbontew v Kenderaan Bas Mara [1983] AC 553, 558." 6. Section 104(4) refers expressly to historical factors. The regulations are only retroactive to the extent that they take historical factors into account in making a calculation. 7. The definition of "qualifying claim" referred to above contains reference to a "work injury claim". Work injury claim is defined to include the costs of claims that had arisen under the 1982 Act. Conclusions In this case there has been no argument addressed to the question whether the activity was transferred as a going concern or not, nor is there any question of identification of the part of the activity which may be associated with the qualifying claims, nor whether the qualifying claims were in fact injuries arising in connection with employment. The question is limited to the application of reg 6 of the Experience Rating Regulations where the activity was transferred as a going concern to the appellant before the enactment of the 1992 Act I understand the appellant's reference to s 5(d) of the Acts Interpretation Act (that the law shall be considered as always speaking) to refer to the meaning to be given to the words in reg 6(2)(a) "where all or part of that activity has been transferred as a going concern to the second employer" so that those words are not to be read as naturally applying to past transactions, but speak of transactions occurring from time to time. It would then be consistent with the regulations to limit the application of subclause (2)(a) to transactions occurring after the commencement of the regulations, as if the words "has been transferred" are read as "is transferred" . The question is one of construction of the statute and regulations in accordance with the manifest intention of Parliament. The main difficulty facing the appellant is that the plain words of the statute encompass reference to past accident experience. There is no foundation for the Court to interpret the definition in the regulations of "qualifying payment" to exclude the cost of claims that were made under the 1982 Act. The extended definition of "work injury claim" which expressly includes claims made under the 1982 Act puts the question beyond dispute. It is clear that the statute and regulations intended that the cost of those claims would be assessed for experience rating. To that extent the regulations have a partly retrospective effect that is contemplated and authorised by the Act. The vital question is whether they should have a further or different retrospective effect by extending to an employer which acquires the experience rating by attribution of claims which it could not foresee and provide against. There is a clear statutory intention that an employer may suffer premium loading resulting from the claims history of another employer from whom an activity is acquired in certain 8- circumstances, but is that to be extended to an employer which acquired the activity before the Act came into force, and before the provisions of the proposed legislation were generally known? Mr Smith argued the matter for the appellant on the basis of interpretation and did not submit that the regulations are ultra vires because they include the cost of claims under the 1982 Act. He submitted that reg 6(1) should be read down because it appears to state an imperative that qualifying claims should be associated with an employer, contrasted with the words of s 104(1): 104. Experience rating of employers - (1) The basic premium payable under section 101 of this Act by an employer may be adjusted by reference to the accident experience of or attributed to that employer. The word "may" suggests that attribution is discretionary. Turning to s 104(4): (4) Without limiting the basis of or procedure for adjusting the basic premium that may be prescribed, the regulations may provide for all or any of the following matters: (a) The division of employers into different categories by reference to the size of the employer, the basic premium payable by the employer, the industry class or classes applicable to the employer or such other basis as is considered appropriate, in each case taking the employer by itself or together with employers who are or were related to or connected with it: (b) The treatment of different categories of employers on different bases for experience rating purposes, including the imposition of a premium loading on an employer or the granting of a premium discount to an employer within a particular category: (c) The attribution of claims, and the costs to the Corporation of such claims, associated with one employer to another employer where all or part of an activity carried on by that first employer has subsequently been carried on by that other employer or where the 2 employers are or were related or connected. The word "may" in subs (4) provides the regulation making power. Also relevant, is subs (5)(c): (5) Without limiting the matters that may be taken into account in making regulations under this Act, regulations made under this Act relating to adjustments to basic premiums payable by employers may take account of - .. .... (c) The accident experience of or attributed to an employer for such period and on such basis as appears appropriate for experience rating. Regulation 6(1) springs from the power to bring about attribution of claims from one employer to another by regulations under the Act. The expression of purpose in reg 6(1) is stronger than the discretion in s 104 and it describes a purpose which is not expressly referred to in the Act, that is the intent that the financial costs to the Corporation are borne by the other employer and not by all employers generally. That intent is consonant with the scheme of the Act and is not objectionable. - 9- In my view, reg 6(1)(a) is not intended to exclude transactions occurring before the enactment of the statute or regulations. There is nothing in the wording of the statute or regulations that points to such an exclusive construction. The argument rests on adopting a construction that avoids retrospective effect. To exclude past transactions as a matter of interpretation would have sweeping consequences and would be going too far. It would be equivalent to deciding that the statute did not intend the process of reattribution (as distinct from experience rating) to have any retrospective effect on prior transactions at the commencement of the regulations. It would mean that a transfer of an activity immediately before the enactment could result in a nil experience rating for the new employer while the former employer may have ceased to pay or provide any earnings at all. By contrast a transfer after the enactment would have an effect of preserving to the Corporation the premium loading for a period of five years. I prefer the respondent's submission that the regulations should be given a construction to accord with the evident purpose of funding the Employers' Account and that the attribution of claims was intend to be related to an activity, so that they would be attributed to another employer where the activity has passed from one employer to another. The discretion Regulation 6(2) describes the circumstances in which reattribution can be made, and in that subclause there is the discretionary "may" which accords with s 104 of the Act. The appellant's submission is that the discretion is not entirely controlled by subclause (1) but is to be exercised in a manner that is appropriate to the circumstances of the case. There is some force in the appellant's submission that the discretion should be exercised as appears appropriate. The expression "as appears appropriate" is used in s 5(c) of the Act in a slightly different context, that is to say that the basis or the period of attribution should be provided by regulation as appropriate. That appropriateness is likely to be linked to policy factors, whereas the question of appropriateness of exercise of the discretion in this case is directed at the circumstances of an individual transaction. There must be circumstances where a manifest unfairness may occur when, for example, an activity was acquired by a conscientious employer from an employer with a deplorable accident history, before enactment of's 104 of the Act when the impact of the new legislation was not known or understood. The accident history may include accidents brought about by gross negligence of the employer, and may have significant ongoing costs to the Employers' Account. The exercise of the discretion to reattribute premium loading should involve the application of the policy of the Act and take account of the circumstances of the qualifying claim, the attitude of the former employee to its responsibilities and balance the effects of the burden that the claim would place on the new employer or on the former employer or on the Employers' Account. The exercise of the discretion has been only an incidental issue on the argument of this appeal. There is insufficient evidence to decide whether there were circumstances in relation to any individual qualifying claim that required reconsideration of the - 10 - discretion. Indeed there is no evidence whether the discretion was exercised at all. The argument on the issue of exercise of the discretion has been addressed only to the point that the Corporation should exercise its discretion not to reattribute because the activity was acquired by the appellant before the effects of the 1992 Act were known. I consider that alone would not be a sufficient reason to review the discretion. No finding is made in this decision as to whether the discretion can be reviewed on other grounds. For those reasons the appeal is dismissed. DATED at WELLINGTON this 7 day of August 1997 D A Ongley District Court Judge