Estate of Karl v Accident Compensation Corporation

IN THE DISTRICT COURT HELD AT WELLINGTON Decision No. 274/2003 IN THE MATTER of the Accident Insurance Act 1998 AND IN THE MATTER of an appeal pursuant to Section 152 of the Act BETWEEN THE ESTATE OF HAROLD PETER KARL (AI 562/02) Appellant AND - ACCIDENT COMPENSATION CORPORATION Respondent HEARD at WELLINGTON on 17 September 2003 APPEARANCES Mr D Vincent, Counsel for Appellant. Ms D S Lester, Counsel for Respondent. RESERVED JUDGMENT OF JUDGE M J BEATTIE [1] The issue in this appeal is whether the respondent is entitled to recover all or part of the sum of $75,091.69 being an over-payment of weekly compensation paid to the appellant during the period 7 October 1992 to 29 March 2000. [2] The decision appealed from is that of the respondent dated 20 February 2001, whereby it declined to grant remission of the debt pursuant to Section 372(2) of the Act. [3] The relevant facts bearing on the issue in this appeal are not in dispute and may be stated as follows: • The appellant is now deceased, he having died on 14 November 2000, and these proceedings are being continued by his personal representatives. 562.02 (pg) 2 • In October 1992 the appellant submitted a claim for personal injury by medical misadventure arising from an incorrect liver biopsy. • Cover was granted to the appellant on 11 November 1993 and it was accepted that the appellant was incapacitated as from the date of the misadventure. • At the time of his injury the appellant was in a farming partnership with his wife, and at the time his claim was presented, income tax returns for both he and his wife were provided to the respondent, together with their respective IRD numbers. • It is the case that the appellant’s wife’s income was considerably greater than his for tax purposes, and by an error made by IRD or the respondent, the appellant’s wife’s income was taken as the appellant’s income and it was on that income that his weekly compensation entitlement was calculated. • The appellant commenced receiving weekly compensation from the date shortly after his claim for cover was accepted and that weekly compensation was backdated to the date of his injury on 7 October 1992. • The weekly compensation paid to the appellant was in effect more than twice the amount that it should have been if the correct calculation had been made. The net amount actually received by the appellant was $402.14 per week when it ought to have been $184.79. • It is accepted by the appellant’s representatives that the appellant and his wife spent the weekly compensation received on normal day-to-day living expenses and overseas travel and no new financial commitments were entered into. • In March 2000 the respondent carried out a review of the appellant’s file and discovered the error and a decision that an over-payment had been made, and thereby a debt raised for $75,091.69, was made on 14 March 2000. • That decision was not questioned and it is taken that there was an over- payment of that sum in the 7½ years that payments had been made before the error was detected. • The appellant, through his solicitor, sought to have the respondent consider remitting the debt on the basis that the error had not been 562.02 (pg) 3 contributed to by the appellant and payments of the weekly compensation had been received by him in good faith. • The respondent considered the appellant’s claim but it is the case that it did not make its decision to decline to remit the indebtedness until 20 February 2001, by which time the appellant had died. • The personal representatives of the appellant sought a review of the respondent’s decision declining the remission and the Review Hearing took place on 26 September 2001. • At that Review Hearing the appellant’s son, representating his father’s estate, referred to the fact of the financial difficulties that the appellant’s widow was in, and of the fact that the estate did not have the ability to repay all or any of the indebtedness as the only asset which the appellant had at the time of his death was his share of the former matrimonial home in which the widow continued to live. • In his decision dated 17 October 2001, the Reviewer stated that whilst he had great sympathy for the plight of the appellant’s widow and of the family’s financial circumstances, he found that as a matter of law, there were no grounds made out under Section 372(2) that the appellant had so altered his position in reliance on the validity of the payments that it would be inequitable to require repayment. He therefore ruled that the indebtedness of the appellant to the respondent remain. [4] This appeal falls to be considered by reference to the provisions of the Accident Insurance Act 1998, as it was that statute that was in being at the time that the appellant made application pursuant to Section 372(2) for remission of the indebtedness. The provisions of Section 372 are as follows: “372 Recovery of payments ― (1) If a person receives a payment from an insurer in good faith, the insurer may not recover all or part of the payment on the ground only that the decision under which the payment was made has been revised on medical grounds under section 73. (2) An insurer may not recover all or part of a payment in respect of statutory entitlements which was paid as a result of an error not intentionally contributed to by the recipient if the recipient ― 562.02 (pg) 4 (a) Received the payment in good faith; and (b) Has so altered his or her position in reliance on the validity of the payment that it would be inequitable to require payment.” [5] Whilst the terminology that is often used in cases where Section 372 is invoked talks of the respondent granting remission of the debt, the true nature of the matter is whether as a matter of law, having regard to the discretionary principles set out in Section 372(2), it would be inequitable for the respondent to recover all or part of the indebtedness. [6] In the present case the respondent accepts that the appellant satisfies the first two criteria required under the Act namely, the appellant did not intentionally contribute to the error which brought about the over-payment, and secondly that he received the over-payments in good faith. [7] This appeal falls to be decided on whether the requirements of Section 372(2)(b) arise, and if so, where the equities lie. [8] In his submissions to the Court Mr Vincent, Counsel for the Appellant, contended that the appellant’s “defence” to the respondent’s claim for recovery of the over- payment was not limited to the provisions of Section 372(2), but that the Court can go beyond that statutory “defence” and consider other equitable forms of relief. In support of that submission he referred to the decision of the Court of Appeal in National Bank of New Zealand v Waitaki International Processing [1999] 2 NZLR 211. Counsel identified the fact that in that case the majority of the Court did not find that Section 94B of the Judicature Act 1908 could apply but that nevertheless other equitable principles that had evolved, particularly those enunciated in the House of Lords decision of Lipkin Gorman v Karpmale Limited [1991] 2 AC 548 could be applied. It was on that basis that Counsel submitted that the circumstances of the present case demonstrate that an injustice would be done if payment were required and that on the balance of the equities the appellant’s position must be favoured. [9] As an alternate submission, Mr Vincent contended that the appellant had in fact altered his position in reliance on the validity of the payments made, that change of position being the signing of a Will in 1995. Counsel’s submission stating “the will transferred assets and property to friends and family in reliance on the validity of the ongoing payments being made to Mr Karl up to his death or from the time he became 562.02 (pg) 5 disentitled to weekly compensation by virtue of his age”. The transfer of ownership of his assets by Will in the belief that he had no indebtedness must therefore be construed as an alteration of position for the purposes of the Section. [10] Mr Vincent also referred the Court to the English Chancery Division decision case of Philip Collins Limited v Davis [2000] 3 All E.R 808. Counsel submitted that decision was an authority for the proposition that a general increase in expenditure by a recipient of an overpayment was sufficient to be considered a change of position in reliance on the validity of the payment. [11] Ms Lester, Counsel for the Respondent, submitted that there was no evidence of any altering of position and that decisions of this Court made it clear that the spending of money on ordinary living and day-to-day expenses did not amount to an altering of position. Counsel further submitted that if there was no altering of position then there can be no consideration of the equities. Counsel further submitted that the making of a Will could not be considered an altering of position as the appellant was aware of the indebtedness prior to his death and could have easily changed his Will. [12] Whilst Mr Lester submitted that there was no basis for the invoking of Section 372(2)(b) in the circumstances of the present case, she nevertheless advised the Court that the respondent was not seeking to take steps to require immediate payment, and that payment would await either the death of the appellant’s widow or the sale of the home. Counsel advised that the respondent had no wish to deprive the appellant’s widow of her home during her lifetime. DECISION [13] This is a case where the facts clearly identify that the appellant received a greater sum than that to which he was entitled on a weekly basis over some 7 ½ years. Furthermore, that additional sum was expended in the ordinary course of daily living. There is no evidence that the appellant undertook any further financial obligations in reliance upon the validity of the sum being paid and therefore I find as a matter of fact and law that the appellant did not alter his position in reliance on the validity of the amount of the payment of weekly compensation to him. [14] In furtherance of that finding I indicate that I follow this Court’s previous decisions, particularly those of Hurley (49/98), Fraser (137/98) and Foss (30/00), that 562.02 (pg) 6 the spending of a weekly over-payment on normal and usual living expenses does not constitute an altering of position. [15] I also intend to follow those same cases where this Court has held that if there has been no altering of position in reliance on the over-payment, then the matter cannot get to the stage where the competing equities of the debtor and creditor must be considered. [16] I have given careful consideration to Mr Vincent’s submission regarding the right of the appellant to seek equitable relief under general principles of equity even if the appellant cannot bring his case within the criteria specified in Section 372(2). Indeed, this is exactly what the Court of Appeal said that Waitaki International could do in its defence, even though it could not bring itself within the criteria of Section 94B of the Judicature Act 1908, which section is in the main part similar in its context to that of Section 372(2) of the Accident Insurance Act. [17] It is the case that the Court of Appeal stated that Waitaki was able to obtain equitable relief on the principles enunciated in Lipkin Gorman, and the Court of Appeal confirmed that those principles were applicable in New Zealand. The Lipkin Gorman principle was identified by the Court of Appeal as being “ …that it is a defence to a claim for repayment of money paid under a mistake that the defendant’s position has so changed that it would be inequitable in all the circumstances to require restitution in whole or in part.” [18] It needs to be recognised that the change of position defence as enunciated in Lipkin Gorman was stated as being a defence to a restitutionary claim, that is a defence to a claim for money had and received. The legal position, as I see it, is quite different in a claim at Common Law for restitution, for monies had or received, or for recovery of monies where it is contended that there has been unjust enrichment, from the principles which apply in relation to over-payments made under the Accident Compensation Legislation. [19] The fundamental distinction between the two is that under the Accident Compensation Legislation an over-payment of a sum of money constitutes a debt and Section 320 of the Act specifically states that a sum of money paid to a person that is in excess of the amount to which that person is entitled under the Act is an over-payment and that the Corporation can recover that debt by way of proceedings. As I take the 562.02 (pg) 7 situation to be, the only defence available to a claim for recovery of that debt is that provided by Section 372 and Section 320 is stated as being subject to Section 372. [20] Accordingly, I find that there is a statutory regime which settles the rights and entitlements of the parties and that equitable principles outside the equitable principle which is enshrined in Section 372(2)(b) do not apply. The recovery of a debt pursuant to a statutory right is not the same as a claim for restitution at Common Law. [21] In the event however that my finding should be shown to be wrong, nevertheless I find as a fact that there has been no altering of position by this appellant which would bring him within any wider equitable principles such as those enunciated in Lipkin Gorman. [22] I reject Mr Vincent’s submission that the making of the Will in 1995 by the appellant in which he devised his property to his family and friends was a decision made which he would not necessarily have made if he had known that he was somehow in a position of liability to the Corporation. [23] The making of the Will cannot be regarded as an altering of position as it is the case that before any property is assigned pursuant to a Will following the death of the testator, all debts owing by the testator need to be paid and met from the estate. Therefore it cannot be said that he had given away his property in the belief that he had no indebtedness. [24] In any event, as submitted by Ms Lester, the appellant was made aware of the indebtedness several months before his death and he could have changed his will if he felt that that indebtedness had any impact upon the manner in which he had devised his estate under the terms of the will he had made in 1995. [25] For the foregoing reasons, therefore, I find that neither as a matter of fact or as a matter of law, can the appellant establish that he altered his position in the reliance on the validity of the payments made by the Corporation. I further find as a matter of law that as there has been no altering of position in reliance on the validity of the payment then there can be no inequity in requiring repayment. Any inequity can only arise if the circumstances of an altered position can be established and I have found that this cannot be established in this case. 562.02 (pg) 8 [26] For the foregoing reasons therefore it is the case that the respondent cannot be disentitled from recovering the amount of the over-payment that it made to the appellant. [27] This appeal is dismissed. DATED at AUCKLAND this 5th day of November 2003 M J Beattie District Court Judge 562.02 (pg)