Tranz Rail Ltd v Accident Rehabilitation and Compensation Insurance Corporation

IN THE DISTRICT COURT HELD AT AUCKLAND Decision No. 177 /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 TRANZ RAIL LTD DCA 383/97 Appellant AND ACCIDENT REHABILITATION AND COMPENSATION INSURANCE CORPORATION a body corporate duly constituted under the provisions of the said Act Respondent RESERVED JUDGMENT OF JUDGE M J BEATTIE ON THE PAPERS The Court has received written submissions from Ms R E Schmidt, counsel for the appellant and Ms S Scott, counsel for the respondent, with a request that the Court issue a decision on the papers. The issue in this appeal is whether the Corporation has correctly exercised its discretion granted to it under regulation 5 of the Accident Rehabilitation and Compensation Insurance (Experience Rating) Regulations 1993 whereby the 2 Corporation determined to Experience Rate the appellant to the maximum 100% in relation to a work injury suffered by the appellant's then employee Ivan Paul Horn. BACKGROUND On 2 February 1995 Ivan Paul Horn was in the employ of the appellant as a Seaman on the appellant's inter island ferry Arahanga. Mr Horn commenced his duties on 2 February at 11 am when the ship was loaded preparatory for a sailing to Picton. As of that date Mr Horn had either been charged with or convicted of possession of cannabis for supply. The Master of the ship was aware of the arrest and charging of Mr Horn and spoke to him at 12.15 pm on 2 February 1995. At that interview the Master advised Mr Horn that the fact of his being charged with drug offences was a serious disciplinary matter and could result in his dismissal. It is clear from the facts that Mr Horn was not dismissed at that point and was directed to continue with his normal duties. In the course of the sailing to Picton Mr Horn tripped over some chain which was lying on the deck and fell and injured his shoulder. This shoulder had been the subject of an injury some years earlier but the medical evidence established that it was a new injury rather than the aggravation of an old injury. There is no question that Mr Horn suffered personal injury by accident and that at the time of that accident (at 3.45 pm) he was still in the employ of the appellant and that the injury occurred during the course of his employment. 3 When the ferry berthed at Picton the Master again interviewed the appellant about the drugs matter and he was thereupon formally dismissed from Tranz Rail's employ on the basis of serious misconduct. This Court is not concerned in any way with whether the circumstances of Mr Horn's dismissal were or were not justified. Mr Horn duly made a claim for cover under the Act , and cover was accepted. He was granted weekly compensation for the duration of his incapacity. The appellant was duly notified of the fact of the claim and of the fact that the full amount of the costs associated with the claim would be attributed to the appellant for experience rating purposes. The appellant sought a review of that decision and at the review hearing counsel for the appellant submitted that the application of 100% experience rating was unfair and excessive having regard to the fact that the employee was dismissed the very day of the accident for serious misconduct. It was the Review Officer's decision that in considering the discretion given to the Corporation in the experience rating regulations does not allow it to take account of unusual circumstances, such as was contended by the appellant as existing in this case. The Review Officer considered that the discretion was a limited one and not wide enough to cover any circumstance. The Review Officer further held that in any event on the facts there were no special circumstances which would move the Corporation to depart from applying the 100% experience rating. In this Court the appellant challenges the decision of the Review Officer and contends that s. 104 of the Act and regulation 5 of the Experience Rating Regulation confer a wide and unlimited discretion upon the Corporation when deciding the percentage an employer will be experience rated for an 4 employee's work injury, and that in those circumstances the Corporation can take into account any unusual circumstances of a particular case. RELEVANT STATUTORY PROVISIONS Section 101 of the Act requires that every employer pay a basic premium to the Corporation at a prescribed rate on the amount of earnings paid to its employees. Section 104 then allows for an adjustment of this basic premium by reference to the accident experience of the employer. The basis of and procedure for adjusting the premium is as prescribed by regulation. Regulation 5(1) of the Accident Rehabilitation and Compensation Insurance (Experience Rating) Regulations 1993 provides the formula for calculating the premium liability of large employers which is as follows: a x [b-(cxb) - (dxe) - (fx g) In the above formula "factor g" is described as: "all, or any such portion as the Corporation in its discretion may determine, 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." Counsel for the appellant submits that there is nothing in the statute or the regulations relevant to this question of employer premiums, attribution and experience rating which would limit the Corporation's discretion and that this discretion is wide enough to enable the Corporation to take account of any unusual circumstances associated with a qualifying claim. Counsel submits that the observations of Judge Ongley in Waipa District Council v ARCIC (Decision 199/97) are distinguishable from the present claim. She refers to a passage of his judgment where he states: "The decision of the Corporation not to proceed with the experience rating adjustments is not reviewable, although there may be special circumstances in which the Corporation could decide not to apply experience rating to a particular employer." Counsel submits that just because, in that case, the Learned Judge found there were no special circumstances to justify any adjustment to the experience rating, that would not mean that the Court could not find in some other case that special circumstances did exist and which could affect the experience rating. Counsel for the respondent also refers to the decision of Waipa District Council and noted that Judge Ongley specifically considered the discretion contemplated by factor "G". Counsel refers to a passage on page 6 of His Honour's judgment where he states: "I agree with the respondent's submission that the discretion contemplated by factor "G" must be a discretion relating to the parts of qualifying payments that should be included in the calculations. The discretion is directed to the nature of the qualifying payments and should be exercised in cases where there are reasons for not including all or part of qualifying payments. The question raised by the appellant does not related directly to those qualifying payments but to a collateral issue. I hold that the 6 Corporation is not bound to exercise its discretion in relation to that collateral issue". Counsel for the respondent further submits that the purpose of experience rating is to place a responsibility on employers who have accidents at their place of work. The objective is to encourage an employer to provide a safer work environment so that the risk of accident is reduced. It is appropriate that a work accident is reflected in the employer's experience rating not withstanding that the employee no longer works there. The important point is that an accident occurred and that it makes no difference for the purposes of experience rating that it happened to an employee who has subsequently being dismissed. DECISION The circumstances which the appellant is seeking to have taken into account for the purposes of the Corporation's exercise of its discretion when determining the quantum of factor "G" are that circumstances existed on the second of February 1995 which would have enabled the appellant to dismiss its employee Horn, prior to him suffering personal injury by accident at the work place, and that indeed he was so dismissed for that very reason shortly after the sustaining of the injury. The appellant says that to attribute 100% of the qualifying payments made by the Corporation in respect of that injury to it as the employer is unfair and unreasonable. The only previous decision of this Court on this issue of which the Court is aware is that of Judge Ongley in the Waipa District Council case (supra). In that case the employee suffered serious injuries resulting in him becoming a paraplegic. He eventually did return to work and was able to carry out his duties until he effectively became redundant. The Council made an ex- 7 gratia payment of sum of $94,500.00 to him but did so, unaware that it would have continued liability for payment to the Corporation in respect of his cost for rehabilitation. The Council considered that it should have this fact taken into account and have the basic premium adjusted under the discretion contained in section 104 and/ or regulation 5, factor "G". In his decision the Learned Judge considered that the discretion given to the Corporation is limited. His reasoning for so saying is stated as follows: "From the point of view of the Corporation, it has an obligation to fund the employer's account on a basis that is equitable amongst all employers. It would not be appropriate for the Corporation, in the absence of clear statutory authority, to take account of broad considerations of fairness in respect of individual employers so to relieve some employers at the expense of employers generally. The qualifying claims which are to be included in experience rating are defined in the Experience Rating Regulations 1993 which are issued in accordance with the regulation making power in s. 104(5). Neither the authorising section nor the regulations themselves refer to any matters to be taken into account by way of reducing premium loading because of notions of unfairness in the way in which a particular employer is affected by the Act." His Honour went on to state: "The unfairness that has occurred is that the appellant made an apparently gratuitous payment to the employee with a view to his rehabilitation at a time when it was not aware that the employee's compensation and rehabilitation costs would be assessed against the appellant in the form of premium loading. The circumstances did not involve any misrepresentation on the part of the Corporation. The general question of fairness must be viewed from the 8 standpoint of the Corporation as well. It is obliged to make payments from the employer's account, including payments for rehabilitation. It was to give credit to the appellant for a payment which might be regarded as, in a general sense, in the way of rehabilitation, it would be giving the appellant credit for an amount which the Corporation would not otherwise be obliged to pay according to the more limited boundaries of rehabilitation under the Act." It is noted that factor "G" is described as being "all, or such portion as the Corporation in its discretion may determine, 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". The discretion clearly relates to consideration of the qualifying payments made. "Qualifying payment" is defined in the regulations as meaning a payment - (i) that the Corporation is able to associate with a qualifying claim attributable to an employer, or deemed to be attributable to an employer under regulations 6; and (ii) that is made not later than the last day of the fourth premium liability year following the premium liability year in which the claim date falls but (b) does not included such a payment to the extent that it is recoverable under section 114 of the 1982 Act or section 77 of the Act. I interpret this discretion therefore to be one which has as its consideration the particular payment made on any qualifying claim and whether the whole of that payment should be attributable to the employer. Thus, I find that the discretion is concerned with the circumstances of what the payment was for 9 and whether in the particular circumstances the employer should be fully or only partly responsible. I find that such a consideration is far removed from the submission which the appellant makes that, simply because the injury occurred on the day the employee was dismissed, the employer should not be "lumbered" with all qualifying payments made by the Corporation in respect of that injury. In other words the basis for the request has got nothing to do with the reason or purpose for qualifying payment itself, but rather with the general notion that it should not be liable for any or a percentage of qualifying payments made to Horn because he was dismissed for some unrelated act of misconduct. This I find cannot be a consideration which can arise when the nature of the particular discretion in factor G is sought to be exercised. I agree with His Honour Judge Ongley's observation that the "question raised by the appellant does not relate directly to those qualifying payments but to a collateral issue". Such is the case in the present appeal, the objection has nothing to do with the particular qualifying payment that may have been made or the circumstances which gave rise to it. The Corporation should not be in any way deflected from including the full amount of any qualifying payment simply because the employee is dismissed subsequent to the time or date of the accident. In fact if that were to be a consideration one could well imagine it possibly becoming a ploy by an unscrupulous employer in an attempt to alleviate itself of its obligations to pay premiums required of it under the Act. Accordingly then, I rule that the Corporation was quite correct to not take account of the particular circumstances put forward by the appellant as a reason for attributing less than the total sum of qualifying payments in relation to the qualifying claim of its former employee Horn, as the 10 circumstances so raised were not circumstances which the Corporation could take into account when exercising the particular discretion contained in section 104 and Regulation 5 - factor "G". This appeal is accordingly dismissed. DATED at WELLINGTON this 3% day of August 1998 Jesthe Judge M J Beattie District Court Judge Tranzrl.doc(gm)