Russell v Accident Rehabilitation and Compensation Insurance Corporation

IN THE DISTRICT COURT HELD AT WELLINGTON Decision No. 206 /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 SHARON ANN RUSSELL of Wainuiomata Appellant (Appeal No. DCA 185/98) AND ACCIDENT REHABILITATION AND COMPENSATION INSURANCE CORPORATION a body corporate duly constituted under the provisions of the said Act Respondent HEARING at WELLINGTON on the 27th day of August 1998 APPEARANCE/COUNSEL N M Drayton-Glesti for appellant S L Scott for respondent RESERVED JUDGMENT OF JUDGE A W MIDDLETON The issue in this appeal is whether the appellant should be required to remit an overpayment of weekly compensation. The appellant suffered personal injury by accident on 2 April 1997 as a result of which she became entitled to receive weekly compensation. When she commenced part time work in February 1996 the quantum of weekly compensation was abated. 2 In early December 1996 the appellant inquired from the respondent's office about the rate of weekly compensation she was receiving. She spoke to an Officer of the respondent who had not previously dealt with her file and that person indicated to the appellant that there appeared to be an underpayment which would need to be quantified and that the appellant would be subsequently notified of the amount. In her evidence before the Review Officer, the appellant had stated that the reason she called at the respondent's office was that she was having financial difficulties because the quantum of her weekly earnings and her part time earnings was insufficient to meet the expenses of her mortgage and to support her three children. She said that the father of the children did not assist with child support and that he had moved to Australia. The appellant said that prior to her visit to the respondent's office she had received a letter in April 1996 from her then Case Manager notifying her that the Case Manager would no longer be her Case Manager and that she would receive notification as to who had been appointed. She said that the staff member who assisted her in December agreed that there appeared to be a number of mistakes on the file which required sorting out. The appellant's evidence was that that person "muttered under her breath about $400". The appellant said that when she inquired what was meant, the staff member appeared to be confused and told her that she required to see more of the file because it appeared that other adjustments needed to be made. The appellant also said that the reason she called at the office was that there had been numerous mistakes made in the payments which she received because of the fact that she was working part time and proper information had not been provided with the result that she was never quite sure whether she had been correctly paid. The appellant said that she heard nothing further from the respondent until she received an advice of payment on the Saturday after Christmas 1996 to the effect that the sum of $15,302.69 had been paid into her bank account. She said that the letter was correctly addressed to her and identified her claim number and her correct bank account number. She said that the letter stated that the money was her entitlement for the period from 11 March 1996 to 30 December 1996 and explained that no receipt was required. The appellant said that as her parents lived near her she took the letter to them to show them what had happened and checked her bank account to ascertain whether or not the money had been paid in. She said that she decided to ring the respondent's staff member to whom she had spoken in early December but found that that person was not available and was away on annual leave. She said that she then decided to pay some of her debts as a result of which she paid her sister the sum of $10,000 in repayment of money leant to her which she subsequently found had really come from her parents through her sister. She also paid overdue mortgage instalments, rates, insurance and overdraft and had a hole in her roof mended. She said that all were pressing debt commitments and at that time she was in danger of losing her house to mortgagee sale. The appellant said that after the January holidays she again phoned the respondent's office to seek assistance from the person to whom she had spoken in December and 3 found that she had been transferred to another branch. She then said that she telephoned her new Case Manager to complain about her low income and that the Case Manager brought up her file on a computer where she saw the sum of $15,000 had been paid to the appellant in December. She said that the Case Manager asked about the money and the appellant explained that the previous employee had organised that payment when she found that errors had been made. The appellant said that the Case Manager made no further comment from which she assumed that the matter was at an end. The appellant said that some two weeks later Mr Avery, an employee of the respondent advised her that he wished to discuss her income with him and she saw him on 27 February 1997. He was concerned about the payment of $15,000 and questioned as to what she had done with it and how much she had left. She said that she had $560 left which she agreed to repay. She said that she was shocked and confused by this interview as she believed that she was fully entitled to the money. She said that she had a further discussion with Mr Avery some two weeks later when she was advised that it would be necessary for her to repay the money which had been paid to her by mistake. The file contains a record of the interview with Mr Avery which was signed by the appellant. In that statement the appellant said that she had been told at the beginning of December that she would receive notification of the amount underpaid which still required to be worked out but she said "I remember her mentioning $400 or about that. I cannot be sure." The file note said that she checked her bank account to find that the money had been paid. She said that she had discussed it with her parents and that between them they considered that because it contained all the correct claim numbers and account numbers the respondent must have been correct in its assessment. In answer to the question that she should have considered the amount paid to be "out of place" the appellant answered "I did not look at it that way. I did not know how much I earn't. I may have been naive but I discussed it with others." The appellant confirmed that she has a half interest in the house in which she resides and that her husband is now in Australia. The house has a Government Valuation of $75,000 on which there is a mortgage of $59,999. She owes $2,000 to the Legal Services Board for the cost of her divorce, she has an overdue tax bill of $280 which she claims was brought about by a mistake made previously in an assessment by the respondent. She also states that she has legal fees owing to her lawyer and is concerned that the respondent has again made her an overpayment of $1,141.02 which she is required to repay. The appellant has no partner and has three infant children to maintain. After the respondent issued a formal decision on 18 April 1997 requiring the appellant to repay the sum of $14,145.68, the appellant applied for a review of that decision. The Review Officer heard the evidence relating to the overpayment, which I have recorded above but considered that the appellant had not received the money in 4 good faith and had not altered her position in reliance upon the overpayment and declined the application. It is against that decision which the appellant now appeals. Ms Drayton-Glesti submitted that it was clear that the overpayment was made as a result of a miscalculation by the appellant which was not in any way contributed to by the appellant. She submitted that the appellant had been concerned about her position. She had no Case Manager and she made inquiries in early December regarding the quantum of her weekly payments. It was as a result of this inquiry that the overpayment came to be made. She submitted further that this payment was made in the circumstances when there had been numerous difficulties with underpayments and overpayments brought about by the nature of the appellant's part time work but it did establish that there had been a series of difficulties in regard to the respondent's assessments of the appellant's entitlements. She submitted that before spending the money the appellant sought the advice of her parents and between them they agreed that having regard to the fact that she had made the inquiry, that she had been told that she had not been properly paid and the matter would be looked into and that her correct claim number and account number were recorded. She had to assume that the payment was genuine. They were also impressed by the fact that she was told that no receipt was required. Ms Drayton-Glesti submitted that the appellant considered that in all the circumstances she honestly believed that the money received was her entitlement. Ms Drayton-Glesti submitted that the appellant had altered her position in reliance on the validity of the payment in that she had pressing mortgage commitments which required to be met to avoid a mortgagee sale. In addition, she had repaid a $10,000 which she thought had been lent to her by her sister but had in fact come from her parents. Ms Drayton-Glesti referred to the decisions in George v ARCIC (156/97) and Saunders v ARCIC (113/98) and submitted that the facts of this case are similar to the facts in those cases and that it would be inequitable to require repayment. She submitted further that having regard to the appellant's now financial position it would be inequitable to require repayment. Ms Scott submitted that the fact that the respondent's employee had mentioned the figure of $400 should have triggered some suspicion when the appellant received a payment in excess of $15,000. She submitted that the fact that the appellant discussed the payment with her parents was insufficient inquiry in the circumstances. She submitted further that at one stage the appellant had assumed that the payment represented the underpayment of weekly compensation and also an independence allowance for which she had not even applied which would seem to be a dubious claim. Ms Scott submitted that in the circumstances, the appellant had not established on the balance of probabilities that she had received the money in good faith. She submitted further that having regard to the decisions in Matthews (104/97), Hurley (49/98), Fraser (137/98) and Royal (141/98) there is authority for the statement that inequity can only arise when there is an alteration of position. She submitted that the appellant had not demonstrated that she had altered her position in reliance upon her entitlement to the money. She submitted that the position is similar to that in the appeal of Royal where that appellant had used her overpayment to pay money to various finance companies to whom she owed money and in that case the Court held that the transfer of a indebtedness from one party to another did not amount to an alteration in position because that appellant would have been in the same state of indebtedness as previously had she not received the payment. The issue has to be decided under section 77(2) of the Act which 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." This appeal does raise some concerns. The appellant initiated investigation which gave rise to the overpayment. She had no Case Manager for the period from April 1996 until apparently early 1997. She was therefore in the position that when she called at the respondent's office in early December 1996 she simply had to speak to whoever was available as a result of which the discussion took place in which the respondent's Officer ascertained, by a brief look of the file, that there had been an underpayment. While much has been made of the appellant's recollection that the respondent's staff member mentioned a figure of $400, reference to the appellant's evidence at the review hearing seemed to indicate that that was very much an "off the cuff" statement. Further, the staff member considered that a thorough investigation of the file was necessary before a proper figure could be ascertained. It was for that reason that she advised the appellant that a letter would follow. The advice of payment then came two days after Christmas. The respondent concedes that the overpayment was an error on its behalf to which the appellant did not intentionally contribute. While the Review Officer expressed his doubt that the appellant accepted the money in good faith because there had been an indication that the overpayment amounted only to a few hundred dollars, I do not consider that so much weight should be attached to that statement. The appellant had had no Case Manager, there had been an acknowledged series of problems in calculating the correct payment to which she is entitled and her query in early December to someone not familiar to her file was that there certainly appeared to be an underpayment, the amount of which had to be assessed and the appellant would be advised. While the figure of $400 was said to have been mentioned by the staff member to the appellant, that is only available to the respondent because the appellant volunteered it. There has been no evidence from the staff member who examined the file and who explained to the appellant that a full assessment would be done and she would be advised by letter. It was therefore with that background that the payment was received by the appellant at the end of December when she said that she had no reason to dispute the figure because everything else on the statement was correct ad she was told that it was not necessary to provide a receipt. While she did shortly thereafter make some payments, I consider that on her evidence she did receive the payment in good faith. 6 This then raises the question as to whether or not she altered her position in reliance upon the validity of the payment. While I agree with Judge Beattie's finding in Royal, that the possible transference of an indebtedness from one party to another does not amount to an alteration of a position, this is not the position for this appellant. She had outstanding mortgage payments which she anticipated could lead very shortly thereafter to a mortgagee sale and she therefore brought those payments up to date to avoid that situation. While by itself that might bring the payment within the concept envisaged in Royal, this appellant went further and repaid the $10,000 lent to her by her sister but found to have been lent by her parents. I consider that this did constitute an alteration in her position made in reliance on the validity of the payment because while the money was owing to her family and she had insufficient funds at that time to even meet her mortgage commitments, she was not obliged to make any commitments to the family. As the appellant has now repaid the family loan, I consider that a requirement to now repay the overpayment does amount to a serious change in her position. This would mean that where she was previously paying nothing to her family she would now have to reduce her weekly earnings by the amount required to be paid to the respondent. I have considered the statement of her financial position which is precarious and is again embarrassed by another overpayment, this time in the sum of $1,300 which the appellant is required to repay. This overpayment again demonstrates the difficulty in which this appellant has been placed over the years because on her evidence this is not the first occasion on which there have been incorrect payments and while the quantum of the latest overpayment is not as high as the $15,000 payment it is still a serious amount. I consider that it would now be inequitable for the respondent to require repayment of the overpayment and the appeal is allowed. There will be costs to the appellant of $800. DATED at WELLINGTON this 15 day of September 1998 A W Middleton District Court Judge dc185-98.doc (nr)