Symons v Accident Rehabilitation and Compensation Insurance Corporation

IN THE DISTRICT COURT HELD AT DUNEDIN Decision No. 20 /98 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 TIMOTHY JOHN SYMONS DCA 226/97 Appellant AND ACCIDENT REHABILITATION AND COMPENSATION INSURANCE CORPORATION a body corporate duly constituted under the provisions of the said Act Respondent HEARD on the 4th day of December 1997 APPEARANCES: Mr P J Sara for appellant Ms C Taylor for respondent DECISION OF JUDGE M J BEATTIE The issue in this appeal is whether there was an unreasonable refusal or failure by the appellant to comply with a requirement made of him pursuant to section 64(1)(b) of the Act which entitled the Corporation to decline to 2 make payment of weekly compensation pursuant to section 73(2)(a) of the Act. Background Facts: The appellant is a former police officer who suffered personal injury by accident in the course of his employment as a police officer. That injury was to his right elbow. The appellant continued to have difficulties with his right hand and elbow and was eventually disengaged from the police force in February 1992. He there upon approached the Corporation to claim earnings related compensation. Various attempts at vocational rehabilitation were made and throughout the appellant continued to be in receipt of weekly compensation on the basis of being fully unfit. In June 1994 the appellant was certified as being fit for light non-physical work duties and thereupon the appellant commenced work on an adhoc basis for Insurance and Commercial Investigations (1987) Ltd as a private investigator. This employment was undertaken with the sanction of the Corporation and thereafter weekly compensation on an abated basis was paid. The appellant's employment with ICIL continued until February 1995 when he left to set up business on his own as a private investigator. The appellant incorporated a company, Southern Investigation Services Ltd in February 1995 and commenced operating in May 1995. The appellant was the sole director of SISL and he and his wife were each 50% shareholders. 3 Even after the appellant had commenced working under his own company structure he continued to receive full weekly compensation on the basis that he was not receiving any income from his employment. He certified to that fact from time to time at the same time as producing the appropriate medical certificates indicating his limited work capacity. On 26 April 1996 the appellant wrote to the Corporation stating: "You will be aware from my Personal File, that I formulated and registered a small company called Southern Investigation Services Limited, in March 1995. The function of this business is of course, private investigation. My previous Case Manager, Miss Nicky Lyons, had requested some business details but at that time I was unable to supply any as the business had not been trading for a fiscal year. However the Company's Books are now with our Accountants for Annual Audit, Companies Report and Tax Returns calculations and I have instructed the Accountants to prepare details for the Corporation. Whilst these details are an extra cost to the Company, I feel that the Corporation will recognise our ongoing efforts to keep it informed of my personal efforts to rehabilitate myself. I will therefore forward those details to the Corporation in due course and of course look forward to speaking with you in the future." In June 1996 the appellant's case manager wrote to him expressing concern that the Corporation was still continuing to pay him full weekly compensation throughout the period where he had been working but in respect of which no details had been forthcoming. The Corporation was concerned that it would have made over payment to the appellant because of his expected income from his business. The appellant responded to that by writing that the Company's accounts were with his accountant for the preparation of returns and that he would arrange for them to be forwarded to his case manager as soon as possible. He further advised that the business was not in a position for him to be drawing earnings so there would be no problems about over payment. By letter dated 4 July 1996 Coopers & Lybrand wrote to the Corporation regarding Southern Investigation Services Lid and advised that the Company's taxable income for the year ended 31st March 1996 was in fact a loss of $5,134.00 as filed with the IRD on 5 July 1996. The appellant's case manager thereupon wrote to Coopers & Lybrand requesting copies of the company's accounts, company tax returns and the appellant's personal tax return. A reminder letter was sent to Coopers & Lybrand on 19 July 1996. By letter dated 31 July 1996 Mr Jackson at Coopers & Lybrand wrote to the Corporation as follows: "Given the sensitive nature of the services carried out by the Company, we have been asked by the abovenamed company to request an explanation from you as to why you require specific information other than the taxable income to 31 March 1996 and for what purpose this information is to be used." By letter dated 2 August 1996 the Corporation replied as follows: 5 "Thank you for your letter dated 31 July 1996 outlining concerns about the release of information to ACC. As you may or may not be aware one of the principals in Southern Investigation Services is also receiving entitlements from the Accident Compensation and Insurance Corporation. The detailed accounts along with a company and personal tax return are required by ACC to accurately assess the viability of the company along with the amount and nature of work being undertaken by the individual concerned. It is a requirement under $64(1)(b) of the Accident Rehabilitation and Compensation Insurance Act 1992 that every person who is in receipt of rehabilitation or compensation shall when reasonably required to do so by the corporation furnish to the corporation such relevant information and the Corporation requires. ACC understand the sensitive nature of the services carried out by the company, however it is important that this information is obtained to assess ongoing entitlements. ACC is legally entitled to obtain information in relation to claimants and has a strict policy on the handling and security of the information. A letter was received by the Dunedin Branch of ACC on 5 July 1996 stating Southern Investigation Services taxable income for the year ending 1996. ACC has been waiting for the detailed accounts for some time. It would appear that you have used the documents ACC require to calculate the taxable income. We therefore request the company accounts, company tax returns and the personal tax return be forwarded to ACC within 7 days or it could result in the cessation of the claimants entitlements." By letter dated 9 August 1996 Coopers & Lybrand enclosed the Company and personal tax return of the appellant advising that these were the returns filed with the IRD on 5 July 1996. The letter advised that a summary of the Company's accounts was included on page 5 of the Company Tax Return. These figures are extracted directly from the financial statements for the Inland Revenue Department's audit and statistical purposes. The personal tax return of the appellant disclosed that his only source of income was from accident compensation. The company tax return indicated a loss of $5,134.00 and on page 5 of the return there is a full page of how that figure was achieved. It indicates that sales and services amounted to $9,336.00 which was stated to be the total assessable income. Salary and wages was stated to be $0. Expenses are shown as $14,470.00 broken down into a number of categories, the major ones being communication - $2,469.00. Legal/ accounting $2,966.00. Vehicle expenses $3,562.00. This tax return has been filed by Coopers & Lybrand and there was a declaration at the foot of page 7 stating that "These are true and correct returns for the year ended 31 March 1996" and signed by a principal of that firm. By letter dated 20 August 1996 the Corporation wrote to the appellant as follows: "Thank you for forwarding your 1996 personal tax return and a 1996 tax return for Southern Investigation Services Limited to ACC. In the letter sent to you and to your accountant Coopers Lybrand on 2 August 1996 ACC also requested that you supply relevant detailed accounts so that the nature, earnings and quantity of work carried out by you can be assessed. 7 To date these documents have not been received. Mr Mark Jackson from Coopers Lybrand was contacted by telephone on 12 August 1996 regarding the documents required by ACC and stated he would try to attend to the matter but that the documents concerned had been returned to you. As outlined in previous correspondence, you as a claimant with ACC have a responsibility to furnish such relevant information as the Corporation requires. A failure to comply with this second request before 28 August 1996 could result in the cessation of your entitlements." This letter was responded to by Trevor Shiels, Barrister, representing the appellant. A copy of his letter does not appear on the Corporation file but the Corporation's reply to it of 9 September would indicate that the appellant was questioning the need to supply further detailed information. It should be noted that at this time there was a fraud investigation of the appellant running in tandem with this issue of disclosure. The investigation into possible fraud was being conducted by Mr Neilson and he advised in his reply: "One of my roles as Examining Officer for the Corporation is to manage and control the claimant fraud investigation reporting process. 'Any investigation into possible claimant fraud undertaken on behalf of ACC has two major aims. To allow ACC to assess if a claimant receiving entitlement is still eligible to receive it and determine whether fraud has been committed in the process of establishing any of this entitlement. 8 Mr Symons has been in receipt of entitlements from ACC. It is a requirement under section 64(1)(b) of the Act that-every person who is in receipt of rehabilitation or compensation shall when reasonably required to do so by the Corporation furnish to the Corporation such relevant information as the Corporation requires. Despite several requests to supply specific information regarding the work carried out by him, Mr Symons has failed to supply this information. ACC has initiated its own enquiries into his work activities, and as you are aware an "investigation file" is held in my office. ACC is aware that Mr Symons has carried out work and been paid for work as a Private Investigator for Southern Investigation Services Ltd. There are concerns that Mr Symons failure to supply ACC with specific details regarding this work is because a full disclosure by him may show that the work and earnings would have affected his entitlements with ACC or may identify that some offences relevant to his ACC claim have been committed by him. To justify withholding the specific information required by ACC you have outline concerns regarding the confidentiality of Southern Investigation Services client details. ACC understands the sensitive nature of services carried out by the Company however there is a strict policy on the handling and security of information provided to ACC. ACC does not consider the confidentiality concerns raised by you to be sufficient grounds to withhold the requested information." As a consequence of not receiving any response to that request the Corporation did by letter dated 23 September 1996 advised the appellant that it had suspended his compensation on the basis and in accordance with the provisions of section 64(1) and section 73(1). 9 The appellant sought a review of that decision and a review hearing did take place. That review highlighted the fact that the Corporation had made its decision in terms of section 73(1) of the Act which was incorrect and the review was allowed. Immediately the Corporation issued a new decision letter dated 3 December 1996 advising that the previous cessation decision letter has been revoked pursuant to section 67A of the Act and it advised that under section 73(2)(a) because of the appellant's unreasonable refusal or failure to comply with a requirement under the Act it was suspending any entitlement to weekly compensation until the requested information is supplied. It is that decision which is the subject of this present appeal. In her decision the Review Officer held that she considered it reasonable for the Corporation to require the further and much fuller information regarding the work carried out by the appellant. She stated that if the company was a financial failure then the Corporation could have required the appellant's vocational rehabilitation efforts to be applied in an area where he was more likely to limit his dependence on the Corporation. She further held that as the company's sole director, the appellant was in a position to authorise the company to release the information. She further stated: "The company was his employer and is itself in a situation identical to other employers who are required to furnish information regarding the activities and earnings of their employees in terms of section 64(1)(b) of the Act." She further stated: 10 "If he wished to shelter behind the Corporate veil, the Corporation would equally be entitled to consider that it did not have sufficient information to ascertain that he was still entitled to be in receipt of weekly compensation." The Review Officer found that the Corporation's request was reasonable and that the appellant's refusal to comply was unreasonable. Relevant Statutory Provisions: Section 64 sets out the responsibilities of claimants. It provides: "Responsibilities of Claimant - (1) Every person who claims for or is in receipt of any rehabilitation, compensation, grant, or allowance shall, when reasonably required to do so by the Corporation - ... Furnish to the Corporation such other relevant information as the Corporation requires:..." Section 73 sets out the Corporation's ability to suspend, cancel or refuse the payment of compensation. It provides: "Suspension, Cancellation or Refusal of Compensation and Rehabilitation - . .. (2) The Corporation shall, upon the unreasonable refusal or failure of any person to - 11 (a) Comply with any requirement made under any provision of this Act relating to any claims; or (b) Undergo medical or surgical treatment in respect of personal injury (irrespective of whether the Corporation is required or permitted to contribute towards the costs of that treatment); or (c) Agree to, or comply with, an individual rehabilitation programme, decline to make any payment under this Act." Submissions: Mr Sara for the appellant submitted that the Corporation could not require the company to provide the information as it was not a recipient of ACC. He further submitted that while the appellant as the beneficiary of compensation might be able to authorise the employer to provide information, the employer is not so bound to provide it if it considers that to do so would be providing confidential information contrary to provisions of the Company's Act. Counsel further submitted that this is not a situation where there should be a lifting of the Corporate veil or that the appellant as the beneficiary and employee of the company can be required to provide information that would be contrary to his duties and obligations as a director and principal of the company . Counsel submits that the corporate veil will only be lifted if it is believed that the company structure is being abused in some sense such as where it is a sham or a facade designed to obstruct or exploit the advantages of 12 incorporation or to shield fraud. Counsel submits that this does not apply in the present situation where the company is bona fide and there can be no suggestion of it being a sham or a facade. Counsel for the respondent submits that it was not contrary to the appellant's duties as a director of the company to disclose the information sought. She submits that Section 145(1)(b) of the Company's Act permits disclosure of company information if such disclosure is required by law. In this case counsel contends that section 64 of the ARCIC Act is the requirement of law. Counsel further submitted that the appellant was hiding behind the corporate veil and thereby seeking to defeat the provisions of the ARCIC Act which permits the Corporation to require documents relevant to assessing a claimants ongoing entitlement to compensation. Decision The information which the respondent has sought of the appellant is the providing of all documentation from Southern Investigation Services Ltd that show the clients, dates, hours, nature and the amount of paid for work carried out by the appellant. The appellant contends that this information is confidential, is sensitive and is more than the respondent is entitled to for the purposes of determining the appellant's entitlements. As a back up to that the appellant says that in his personal capacity he does not have that information, he as an employee has not kept any records of the nature sought but that only in his capacity as a director and principal of the 13 company could that information be provided and he says that this is contrary to his obligations and duties as laid down in the Company's Act. The Corporation was provided with all the details of how the company's net loss came about and the return which was made by Coopers & Lybrand to the Inland Revenue Department on the company's behalf gave all the details that the taxation authorities presumably required for the purposes of assessing liability for tax. The return was accompanied by a declaration signed by a principal of a major accounting practise. Essentially I assess the Corporation's requirement to be that it be provided with the particulars of how the revenue was obtained. In effect I assess this to being a request by the Corporation to carry out an audit of the company's business. The company's letterhead indicates that it carries out investigations, fraud- insurance and commercial, tracings - persons and debtors and document service. It is easy to understand the company's concern that the Corporation is seeking to obtain full details of the clients, nature and scope of work which it has carried out over the financial year in question. Leaving aside any question of the appellant's perceived separate and distinct roles in the company, I find that he is undoubtedly the alter ego of the company and can be required under section 64(1)(b) to furnish information as to the company's operation and his remuneration from it. I find that the information that he has supplied through his accountants do satisfy the requirements in that regard. I do not consider that this appeal needs to consider the question of lifting the corporate veil, and in any event a decision that it be lifted would not necessarily entitle the respondent to the information it is now seeking. 14 Section 73(2) of the Act entitles the Corporation to decline to make payment where there has been an unreasonable refusal or failure to comply with any requirement made under any provision of the Act. This section has implicit in it that the requirement itself is reasonable and accordingly a refusal cannot be regarded as being unreasonable where the requirement asked is itself unreasonable. As has been decided on previous occasions the question of reasonableness is to be viewed objectively and each case depends on its own particular circumstances. In the circumstances of this case, the stated purpose of the Corporation in requiring the information was to determine whether this self employment venture was viable and whether the Corporation may need to review the appellant's particular employment and have him seek other avenues of retraining or job placement with a view to minimising his dependency on ACC payments. Having regard to that purpose, I find that the information which the appellant has supplied is sufficient for the Corporation to assess whether the appellant should be further supported in this particular venture. It is not for this Court to make any value judgement on the economic viability of the appellant's company. In addition, for the purposes of determining the quantum of weekly compensation to which the appellant was entitled, the information provided gave all that was necessary. The letters from Mr Neilson indicate quite clearly that a significant reason for seeking the information was the detection of possible fraud and I find that that is not a requirement which can be clothed under section 64(1)(b). However, dealing with the matter purely on the plane of obtaining sufficient information to assess continuing entitlement and/ or the amount of same I 15 find that the appellant had provided all that he could reasonably be required to do and that the further information which was being sought was not information to which the Corporation was entitled. The corollary of this is that the appellant's refusal to provide that information when viewed objectively was reasonable, being reasonable on the basis that the Corporation was not entitled to demand it of him. Accordingly then, I find that the decision of the Corporation to cease to make payment of weekly compensation pursuant to section 73(2)(a) of the Act was wrong, there having been no unreasonable failure or refusal of the appellant to comply with a requirement under the Act. That decision is therefore revoked. The appellant is entitled to cost which I fix at $850.00. DATED at WELLINGTON on this | | day of February 1998 M J Beattie District Court Judge Symons.doc(gm)