Auckland Co-Operative Taxi Society Ltd v Accident Rehabilitation and Compensation Insurance Corporation

IN THE DISTRICT COURT HELD AT WELLINGTON Decision No. 2 41 /99 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 THE AUCKLAND CO- OPERATIVE TAXI SOCIETY LTD DCA 328/98 Appellant AND ACCIDENT REHABILITATION AND COMPENSATION INSURANCE CORPORATION a body corporate duly constituted under the provisions of the said Act Respondent JUDGMENT OF JUDGE M J BEATTIE ON THE PAPERS The Court has received written submissions from counsel for the appellant and counsel for the respondent with a request that it deliver a decision on the papers. The issue in this appeal is whether the respondent's decision to reclassify the appellant under Classification Unit 61230-Taxi and Other Road Passenger Transport - for the premium years 1995, 1996 and 1997 pursuant to section 103 of the Act, was the correct classification for the appellant's business and undertaking. 2 BACKGROUND FACTS The appellant is a society duly incorporated under the provisions of the Industrial and Provident Societies Act 1908. It is a co-operative of its members. Its constitution and operations are governed by the provisions of the Industrial and Provident Societies Act 1908. Each member of the society is a taxi proprietor in his or her own right. Each member must own his or her own taxi. To be a member of the society you must have the appropriate taxi license issued by the Land Transport Safety Authority. There are approximately 700 shares in the society, each share representing a taxi or taxi van. No one member is permitted to own more than four shares, i.e. to operate more than 4 taxis. The principal object of the society, as declared to be so in its constitution, is the provision of taxi communication facilities. Every taxi owner in the society operates his own business. That business is entirely independent of the society. Each shareholder is separately levied for ACC levies, those levies in every case are levies calculated under Classification Unit 61230 (Taxi and Other Road Passenger Transport). The Society was set up and does provide telecommunication services as the middle entity between the public wanting taxi services and the taxi operators who provide them. THE APPELLANT'S BUSINESS ACTIVITY The Society provides a telecommunication service to its members through a semi- computerised data despatch system. The system employs telephone staff who field the calls from the public 24 hours a day, 7 days a week. All the information received from the public, as it is received, is punched into computers in front of each telephone receiver. That information appears Screens contemporaneously on coloured -greens before data despatch operators. The despatchers monitor the orderly despatch of the information to appropriate vehicles in appropriate locations. Each taxi has in it a small receiving computer terminal through which it receives orders based on its location and vehicle type. The taxi operators, through a grid system, input their location into the main computer as they move from area to area. The system then transmits the work to the closest available appropriate vehicle, based on the data information provided by the taxis about their current location. When the job flashes up on the taxi's computer screen, the taxi has a limited number of seconds to accept the hire by pressing the "accept" key. If the "accept" key is not pressed within the prescribed period then the computer automatically switches that hire to the next available taxi. There is no voice communication in this system. The only people employed by the society are those employed in its office answering telephone calls and despatching orders by computer. The society does provide an ancillary service to its members by way of administration of accounts for credit work and dealing with complaints and queries. The appellant's classification has been that of "Telecommunication services Classification No. 71200." Counsel for the appellant advised that the genesis of this classification is lost in the mists of time. Safe to say, it goes back some years beyond 1995 and it cannot be determined whether it is the classification that was asserted by the appellant, and hitherto accepted by the respondent, or whether it was imposed by the respondent at some earlier time. Suffice as to say that prior to October 1997, that classification had never been queried by the respondent. 4 The correctness of that classification was first raised by the respondent in a letter to the appellant in October 1997. The respondent advised that it was intending to review the appellant's classification for the years 1995, 1996 and 1997. By letter dated 14 January 1998 the respondent advised the appellant that it was reclassifying the appellant's classification unit to 61230 - taxi and other road passenger transport. The letter stated: "The information available to ACC would indicate that Auckland Co- operative Taxis Society Lid is engaged in answering telephone calls and providing radio based communication services to taxis. Based on the available information that the Auckland Co-operative Taxis Society is engaged in the activity of taxi radio based operations, the correct classification unit for the company is as follows: 1995 - 1997 Classification unit: 61230 taxi and other road passenger transport - taxi radio base operation (except for taxi trucks). This re-classification of the employment premium paid by Auckland Co- operative Taxi Society Lid is not influenced by whether or not the company owns taxis or employs taxi drivers. The re-classification is based on the service provided by Auckland Co-operative Taxi Society Lid being a taxi radio base operation. Taxi radio base operation has been specifically listed as an activity coming within classification unit 61230. This listing has occurred annually in the 'ACC Employer Premium Rate Booklets since 1995'. The respondent's reasoning for its classification of the appellant into the activity "taxi and other road passenger transport", and which reasoning has been maintained in its submissions to this Court, is that if one has regard to the Australia and New Zealand Standard Industrial Classification handbook (ANZSIC), then in the sub-classification 5 which comes within that description there is the "primary activity of - taxi radio base operation" (except for taxi trucks). Thus, the ANZSIC handbook incorporates taxi base radio operations within the industry classification of taxi and other road passenger transport whereas "telecommunications services" and its sub-categories does not contain anything which is descriptive of a taxi despatch service. The respondent contends that taxi radio base operation, even if radios are not actually used, closely approximates the activity performed by the appellant and is the most appropriate of the primary activities listed in the ANZSIC. It is the primary submission of the appellant that whilst the categories and sub- categories referred to in the ANZSIC are helpful and can be used as a guide, those sub-classifications have no legal status, nor were intended to have any legal status, and where adherence would lead to an absurd or unjust classification, they should not be used as the yard stick. It is counsel's submission that the ANZSIC sub- classifications have no statutory or regulatory recognition and the respondent is not bound by them when it exercises its discretion under section 103(3) of the Act. The relevant statutory and regulatory provisions for this appeal are as follows: Section 101(1) of the ARCI Act provides: "101. Premiums payable by employers - (1) There shall be payable by every employer, in accordance with this Act and regulations made under this Act, a basic premium at such rate or rates as are prescribed on the amount of earnings paid or deemed to have been paid by that employer to its employees." Section 103 of the ARCI Act provides: "103. Classification of industries - 6 (1) Employers and earners who are not employees shall be classified into industry classes defined in regulations made under this Act for the purposes of setting premiums payable under sections 101 and 102 of this Act. (2) Premiums set under sections 101 and 102 of this Act shall be determined for each industry class defined under subsection (1) of this section. (3) Subject to this Act, the Corporation shall decide which classification of industry is appropriate in relation to any employer or earner who has earnings other than as an employee by whom a premium is payable. (4) Separate accounts shall be kept of the amounts collected from each industry class under sections 101 and 102 of this Act and the amounts expended for the purposes of section 100(3) of this Act in respect of earners within each industry class" There have been a succession of regulations made for the purposes of section 103(1) and the relevant regulations for this appeal are the Accident Rehabilitation and Compensation Insurance (Employment Premiums) Regulations 1994, 1995, 1996. The Regulations have essentially remained the same insofar as they affect this appeal over the three years in question but, with a change of wording, but not of meaning, from 1994 where the descriptive word was "classification unit" to that of 1995 and later where the descriptive word is "activity". In each case the relevant regulation states "employees shall be classified according to the description of the classification unit as set out in the schedule to these regulations which most accurately describes their employer's classification unit (activity)". The common definition of classification unit/activity means "the industry trade business profession or undertaking of an employer or a person who has earnings other than as an employee". 7 The schedules to the Regulations contain the various classification unit descriptions with their classification unit numbers and the rate of premium per $100 of earnings. It is in the schedule to those regulations that there appears taxi and other road passenger transport - classification unit No. 61230 and Telecommunication services - classification unit No. 71200. There is no question that classification unit 61230 has a considerably higher rate of premium per $100 of earnings than classification unit 71200. There is no mention in either the Act or the Employment Premium Regulations of the classifications as stated and set out in ANZSIC, nor indeed is there any reference to ANZSIC at all. As section 103 requires, the Corporation is charged with the duty of classification of employers and earners, who are not employees, into industry classes defined in the regulations which is appropriate. By reference to the regulations the appropriateness means as determined by the nature of the goods or services produced or rendered, or which most accurately describes the employer's activity. As this Court has previously noted in its decision of Tranzpower NZ Ltd (217/97): "Classification is not to be considered with regard to the activity of the employees, but rather having regard to the nature of goods and services produced or rendered by the employer. The question to be asked is what is the activity of the employer not what are the activities of the employees. Insofar as the activity of this appellant is concerned the description of it, which I have provided earlier on in this judgment, is accepted as being correct by the respondent. Given that that is the case, I adopt the description of the activity of the appellant, as that word is defined in the regulations, as being the provider of a communication link between members of the public seeking taxi services and its taxi operator members. The appellant does not carry on a taxi business. The taxi operators are separately classified and the only employees of the appellant are those that provide the telecommunication service between the public and the self-employed taxi proprietor, being the members of the Society. As has been noted, the respondent's contention is that the appellant's activity fits within the sub-classification set out in ANZSIC of taxi radio base operation (except for taxi truck), it being a subclass there described in the classification taxi and other road passenger transport, which correlates with the wording in the schedule to the regulations of that description of the classification unit 61230. It is to be noted that in the exclusions in the reference in ANZSIC is the exclusion of taxi trucks where it is said that "Operating taxi trucks with drivers are included in sub-class 1611000 road freight transport". I take that distinction to highlight the fact that passenger transport is regarded as a different activity or category from freight transport and it is that latter category into which goes a taxi truck. It seems therefore that the primary activity described as taxi radio base operation is one where the operator in fact operates the taxis and that is part of the activity. It is more than simply operating a radio communication service. The essence of this appeal is the contention by the appellant that the Review Officer was wrong in law when he ruled that the ANZSIC book has the force of law in New Zealand and that it was conclusive therefore in his opinion that the appellant's activity came within the description of taxi radio base operation (except for taxi trucks). He did not go on to consider counsel for the appellant's argument that such classification led to an absurdity when clearly the appellant was providing a telecommunication service. Counsel for both parties have referred the Court to its previous decisions where it has used the ANZSIC classifications as a guide to determining the correct classification of an employer's activity. However, nowhere has this Court said that the ANZSIC has the force of law, as clearly it does not. As I have identified, there is no statutory recognition of it at all. The fact that it may have been used as the basis for the various classification unit descriptions which are set out in the schedule to the regulations and that there may be correlating reference numbers, does not thereby elevate it to anything more than it otherwise would be, namely, a standard for industrial classification. As is stated in the ANZSIC document itself "The objective when developing an industrial classification is to identify groupings of businesses which carry out similar economic activities. Subject to certain criteria being met, each such grouping defines an industry and the similar economic activities which characterised the businesses concerned are referred to as activities primary to that industry." Further on it states: "The ANZSIC New Zealand version of 1996 has a structure comprising categories at 5 levels, namely, Divisions (the broadest level), the subdivisions, groups, classes and sub-classes (the finest level). At the divisional level the main purpose is to provide a limited number of categories which will provide a broad overall picture of the economy and hence be suitable for publication and summary tables in official statistics. " The economic emphasis which is apparent in the groupings of ANZSIC is to be contrasted with the underlying concept of the ARCIC Act for the financing of services, treatment etc. that the respondent is required to provide under the Act. 10 Insofar as premiums payable by employers are concerned, the regulations specifically state that it is recognised that the premium rates for each classification unit have been risk weighted on the basis that functions which are ancillary or subservient to the activity comprising that classification unit do not form a separate activity and are treated as part of that activity. Thus, the whole thrust of the fixing of premiums for particular activities is an assessment of the risk of injury associated with the particular activity of the employer concerned. As was observed by His Honour Judge Middleton in the David Graham Processing Limited decision (200/98) "The intention of the classification requirements is to require employers to pay premiums to cover injuries which may arise in the course of their particular operations. For this reason various classifications are provided with differing rates of premiums based on the fact that the more accident prone the nature of the undertaking, the higher will be the premium." Having found as I do that there is a basic distinction between the underlying purpose of the classifications for ANZSIC and the Employment Premium Regulation Schedule of classification units, I find that the former can only at best be used as a guide to assist the respondent under section 103(3) but that at all times the over riding statutory requirement must apply, namely, that the Corporation determine the classification of an employer in the classification unit which most accurately describes the employer's activity. Blind adherence to some economic grouping such as in ANZSIC is simply not compatible with that statutory requirement. In short then, the fact that the Review Officer based his decision on the premise that the ANZSIC classifications had the force of law for the purposes of classification under section 103(3) is sufficient to hold that that decision is wrong. Indeed, the Review Officer did not go on to look at the matter from the perspective which counsel for the appellant had urged of him, namely, that the description of classification 16230 did not most accurately describe the appellant's activity. 11 I have already indicated that I do not consider the sub-classification provided in ANZSIC taxi radio base operation (except for taxi trucks) to be accurate in any event, it being part of a group of sub-classified activities all to do with passenger transport operation As has been accepted, the appellant is not concerned with any form of road passenger transport operation, be it taxi or otherwise. I find as a fact that its principle activity, being a telecommunication service as the middle entity between the public wanting taxi services and the taxi operators who provide them, is an activity which is most accurately described as coming within classification unit 71200 telecommunication services. To categorise it in any other classification would be a nonsense and I note the analogy which counsel for the appellant has made with the fictional decision, but nevertheless illustrative of the point, where the horse was to be regarded as a bird. For the foregoing reasons therefore, the respondent's decision is revoked and the appellant is entitled to have its activity classified under classification unit 71200 - Telecommunication Services. The appellant is entitled to costs which I fix at $1,500. DATED at WELLINGTON this 22 - day of September 1999 Deaths M J Beattie District Court Judge 328.98ACTSL.doc(gm)