Waipa District Council v Accident Rehabilitation and Compensation Insurance Corporation

IN THE DISTRICT COURT Decision No. (99 197 HELD AT TE AWAMUTU 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 WAIPA DISTRICT COUNCIL Appellant (Appeal No. DCA 198/97) 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 September 1997 APPEARANCES John Gallie for appellant Fleur Patterson for respondent DECISION OF JUDGE D A ONGLEY This appeal concerns premium loading under s 104 of the Accident Rehabilitation and Compensation Insurance Act 1992 in circumstances where the appellant claims that the premium loading leads to an injustice, and that the Corporation should have exercised a discretion. The appellant has submitted that a discretion exists in s 104(1) of the Act to decide whether to adjust the basic premium by reference to the accident experience of an employer, and that a discretion also exists under reg 5 of the Experience Rating Regulations 1993 where the Corporation may determine whether all or a portion of the qualifying payments relating to a qualifying claim will be included in the formula for premium loading against an employer. The employee suffered an accident on 22 November 1989, sustaining serious injuries in the course of his employment as a result of which he is a paraplegic. - 2 - As a result of Local Government reorganisation which took effect on 31 October 1989 the Waipa County Council ceased to exist and its functions became absorbed into a larger area administered by the Waipa District Council. The employee had been the County noxious plants officer. Responsibilities under the Noxious Plants Act 1978 were taken over by the Waikato Regional Council but it contracted with the District Council to continue with the work as agent for the Regional Council.. In practical terms the District Council continued with the employment of the employee during the month of November 1989 when he suffered his accident. Because of the agency situation much of the control and direction of his employment was by that time in the hands of the Regional Council. It appears that the accident was not caused or contributed to by the negligence of the appellant. The employee returned to work with the assistance of the appellant which acquired and specially fitted a suitable vehicle and provided him with ground floor office accommodation, ramps and toilet facilities. He increased his work capacity until by October 1991 he was performing the same level of work as before. However, in June 1992 the contract for the two local authorities came to an end and the employment of the injured employee was terminated because the appellant was unable to offer him a position. The appellant paid him severance pay of $10,453.88. Later the Council received a payment of $100,000 from an insurance policy cover in its own name against eventualities including the accident suffered by the employee. The policy was owned by the appellant and provided insurance cover to enable it to meet additional costs incurred in training alternative employees, taking on temporary employees, etc. The appellant decided in the circumstances that it would make a further payment to the employee of about $94,500. The appellant understood that the money was used by the employee towards a purpose built home on a small block of land which he already owned. 'At the time of making those payments the appellant was unaware that it would have any liability for payment to the Corporation in respect of the cost of rehabilitation of the injured employee. The payment was made before enactment of the Accident Rehabilitation and Compensation Insurance Act 1992. In fact, no claim was made against the appellant until a letter of 23 May 1995 in which the Corporation notified the appellant that the accident was classed as a work accident and would be assessed for premium loading. In response to a request by the appellant, the Corporation reviewed its decision and assessed the claims costs from 1992 onwards to Waikato Regional Council. The Corporation reviewed its decision once again and returned the costs to the account of Waipa District Council by a decision of 2 July 1996. The reason was that Waikato Regional Council did not employ staff to carry out the work that the employee had previously undertaken, so that there was no basis for reattribution of the costs to another employer and the cost would continue to be borne by the appellant. The Corporation explained its decisions in a letter to the appellant's solicitor of 8 October 1996. It expressed the reason that "following Local Government reorganisation in 1992, the Waikato Regional Council did not employ staff to carry out the work Mr Martin had previously undertaken. This was in fact contracted out to independent companies". In fact the Local Government reorganisation had occurred not in 1992 but in 1989. The Corporation may not have realised that the appellant inherited the responsibility for its - 3 - employee when it employed him under a contract of agency from the Regional Council before his accident in November 1989. The mistake, evident in the letter, shows a misunderstanding of the true position but the mistake relates only to incidental circumstances and could not be said to be fundamental to a decision made by the Corporation. The appellant's first submission is that the Corporation has failed to address a discretion . which it has under s 104(1) of the Act which is as follows: 104. Experience rating of employers - (1) The basic premium payable under section 101 of this Act by an employer may be adjusted by reference to the accident experience of or attributed to that employer. Mr Gallie has pointed out that, as originally enacted, s 104(1) stated "that the basic premium ... shall be adjusted ..". There was a deliberate legislative change when the section was substituted by a 1993 amendment. I think that, if there is a discretion, it could only be very limited. Subsection (3) states that the basis of adjusting the basic premium shall be prescribed by regulations under the Act, and subs (5) authorises the making of regulations taking account of the following matters: (5) Without limiting the matters that may be taken into account in making regulations under this Act, regulations made under this Act relating to adjustments to basic premiums payable by employers may take account of-- (a) The amount of the basic premium, earnings as an employee, or other payments by an employer, in each case either by itself or aggregated with any such amount payable by persons who are or were related to or connected with an employer: (b) The inability to allocate, or difficulties associated with allocating to particular employers, any costs incurred by the Corporation: (c) The accident experience of or attributed to an employer for such period and on such basis as appears appropriate for experience rating If there is any discretion in s 104(1) it is a discretion whether or not to adjust the basic premium at all by reference to accident experience. Accident experipuce is likely to encompass more than one claim in any year when the premium is adjusted. The discretion which is suggested would not be a discretion whether or not to adjust in respect of a particular claim or in respect of particular payments, but whether or not to make any adjustment whatever in respect of all the accident experience of the employer affecting a particular premium year. It appears unlikely that the word "may" is intended to confer an obligation on the Corporation to exercise a discretion in every case. Ms Patterson has submitted that the word "may" is permissive and is used in the sense described by McMullin J in Parker v MOT [1982] 1 NZLR 209 at page 214 where he said: "The word "may" is clearly empowering in contradistinction to "shall" which is mandatory. "May" means "entitled to"; it is facultative. It confers on an enforcement officer the right to do something which he might otherwise not be entitled to do. But it does not impose a duty positively requiring the enforcement officer to take the next step and admitting of no exceptions to it. In some of the - 4 - judgments in the High Court it is said that the phrase "may require" "imposes a discretion". The use of this substituted phrase is, I think, unfortunate. The word "discretion" sometimes has a special use in our legal system. It may be used in the sense of a judicial discretion. It is used again in the field of administrative law where it may be the subject of review by the Courts. Neither of these uses has any place where "may" is used in the blood/breath alcohol legislation. In the relevant provisions of that legislation "may" does no more than confer a power." Mr Gallie submits that there is nevertheless a discretion open to the Corporation and refers to the further observations of McMullin J when he said: "But it is a power, the exercise of which will normally follow where the conditions precedent to its use are established. "May" is not imperative as is "shall", the use of which would require the enforcement officer to proceed inexorably with the next step whatever the circumstances. It allows the officer to stop short of taking the next step where considerations of a practical, urgent, or humane kind are present." McMullin J then went on to detail a particular analysis of those sections of the Transport Act and at page 215 said: "These reasons demonstrate that the use of the words "may require" confers on an enforcement officer a power which is exercisable once the conditions precedent to its use have been established. When they have been established the officer may exercise the power without further encumbrance. Those considerations of administrative law which control the exercise of a discretion by an administrative tribunal have no application to blood/breath alcohol testing which more often than not will be performed at the roadside in the hours of darkness." I agree that the word "may" in s 104(1) is permissive or facultative. The decision of the Corporation not to proceed with the experience rating adjustment is not reviewable, although there may be special circumstances in which the Corporation could decide not to apply experience rating to a particular employer. I do not consider that this could be one of those cases. 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. In the present case the inclusion of the particular employment accident as a qualifying claim is a simple matter of history. The employee was working for the appellant and classification as a work injury inevitably followed. The circumstances do not exhibit anything that is unusual. 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. - 5. The general question of fairness must be viewed from the standpoint of the Corporation as well. It is obliged to make payments from the employer's account, including payments for rehabilitation. If 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. The Corporation would never have made a payment of close to $100,000 to enable the employee to build a house. If the Corporation is to give the appellant credit for such payments it would be a partial equivalent of the Corporation actually making a payment that it is not entitled to make under its rehabilitation provisions. If, on the other hand, the appellant had made a payment which had the effect of relieving the Corporation of the obligation to make payments to the employee, there would, in most cases, be a degree of automatic adjustment in the sense that a certain level of premium loading would be avoided because the appellant had made a direct payment. On the facts of this case, the Court is not able to say that the Corporation should not have assessed the appellant under s 104(1). A second question on this appeal, concerning exercise of a discretion not to impose premium weighting, arises under reg 5 of the Experience Rating Regulations. Regulation 5 sets out the formula for experience rating of large employers. It includes "factor g" which is "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.". There is no need to refer to the definitions of qualifying payments, premium liability year and qualifying claims. The point made by the appellant is that there is clearly a discretion conferred by reg 5(1) in deciding on the amount to include in "factor g". Ms Patterson submitted that the only discretion exercisable under "factor g" is in the. determination of the qualifying payments to be included. The payment made by the appellant direct to the employee was not a qualifying payment so that the Corporation is not called upon to determine in its discretion if all or part of it is to be included in "factor g". The appellant submits that the Corporation should bring it into account in the calculation, that is to say that the Corporation can off-set the qualifying payments to some extent and thereby include only a portion in "factor g". The question appears not to have been addressed by the Review Officer. The appellant has submitted that there is an overriding duty in administrative law for the Corporation, as a statutory authority, to act fairly and to make its decisions according to law and after taking into account all relevant circumstances. The appellant submits that: (a) The Corporation has failed to give reasons for its decision of 1 November 1995 when it had decided to shift all claims costs relating to the employer from the appellant's claims history from the 1992/93 financial year onwards. (b) The Corporation gave no reasons for its decisions of 2 July 1996 when it reviewed the previous decision and reinstated the attribution of claims costs to the appellant. - 6- (c) It gave no indication of the matters that it took into account when exercising its discretion to adjust the basic premium, that is to say by applying the formula including 'factor g". d) That it failed to reconsider its discretion when advised of the gratuitous payment made by the appellant to the employee. (e) That it did not carry into effect the recommendations of the Review Officer in the review decision of 21 May 1997 which leads to this appeal (f) That it failed to demonstrate recognition of the underlying principles relating to the employer's account and assessment of premium loadings which include the encouragement of employers to advance the rehabilitation of employees to return to the work force. 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 calculation. 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 relate directly to those qualifying payments but to a collateral issue. I hold that the Corporation is not bound to exercise its discretion in relation to that collateral issue. It is analogous to a counterclaim which exists independently of the claim for refund of part of the qualifying payment according to the reg 5 formula. In my view it is not a matter that the Corporation is bound to take into account. There may be other circumstances where the Corporation should take such a payment into account. I reach the conclusion that there is no ground for reviewing the exercise of the Corporation's discretion in this case. In this case, the appellant asserts that the Corporation has failed to effectively address the employee's rehabilitation. The appellant says that he has a degree in agricultural science and is reasonably mobile despite his disability, as is demonstrated by the fact that he was able to resume his former capacity to carry out his employment with the appellant, and only ceased working when he became redundant because of the end of the appellant's pest control functions. The appellant says that he has been able to undertake strenuous athletic activities and, while it is impossible to restore him to his former health, he should have resumed earning. 89. Application for review - ...... (4) Any person who is dissatisfied with any decision of the Corporation relating to any premium payable or claimed to be payable by that person under this Act may apply to the Corporation for a review of that decision; ..... (4A) Nothing in subsection (4) of this section shall confer any right to apply for a review of any decision relating to the entitlement under this Act of any person to any payment or rehabilitation or the making of any payment directly or indirectly under this Act in respect of that person. - 7- The subsection prevents a review of any decision relating to the entitlement under the Act of any person to any payment or rehabilitation or the making of any payment directly or indirectly under the Act in respect of that person. The appellant submits that s 89(4A) is not a barrier to challenging the performance of the Corporation because it does not question the entitlement of the appellant to rehabilitation. What it questions is a review of the steps taken by the Corporation for effective vocational rehabilitation. Mr Gallie refers to provisions in the Act imposing such an obligation on the Corporation, and submits that the Corporation's performance is amenable to review at the instigation of the appellant which has a financial interest in the proper performance of the Corporation's obligations. If the Corporation made no effort to advance the employee's rehabilitation and continued to pay him weekly compensation, the appellant would be powerless to mitigate a loss sustained in the form of premium loaded payments. There is force in the argument that the Corporation should be accountable to the appellant for a failure to discharge statutory duties if that failure results in cost to the appellant. If the Corporation acknowledged that by its own failure it was maintaining a liability to pay weekly compensation to the employee, it may well take that into account in deciding that qualified payments should not be laid off against the employer. It may be a reason for exercise of a discretion to reduce "factor g". I accept the appellant's submission that the question thus raised is probably not a question that is barred by s 89(4A) because it does not enquire whether an employee is entitled to payments. It assumes that the employee is entitled to payments but questions whether the entitlement arises only because of the Corporation's failure to carry out a statutory duty. This is an important issue which cannot be determined on the present appeal. There has been no primary decision on the particular question and there is no specific evidence concerning the Corporation's conduct, and the liability for payment of entitlements that it might have avoided by acting in accordance with its statutory responsibilities. If a situation exists warranting the deletion of qualifying payments under "factor g" and the Corporation decides not to make an appropriate adjustment, it may be that the appellant has other remedies including judicial review or civil proceedings for damages for breach of a statutory duty. Those matters are entirely outside the scope of this appeal. For those reasons the appellant fails on the appeal. Although the appellant may yet have some remedy, it is not a remedy available on this appeal. The appeal is dismissed. DATED at WELLINGTON this 23M day of September 1997 D A Ongley District Court Judge