Whitianga Excavators Limited v Accident Rehabilitation and Compensation Insurance Corporation

IN THE DISTRICT COURT HELD AT TAURANGA Decision No. ( 92 199 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 WHITLANGA EXCAVATORS LIMITED DCA 545/98 Appellant AND ACCIDENT REHABILITATION AND COMPENSATION INSURANCE CORPORATION, a body corporate duly constituted under the provisions of the said Act Respondent HEARD at TAURANGA on the 20th day of May 1999 APPEARANCES Mr H Abrahamson advocate for appellant Mr M B Mccarthy counsel for respondent RESERVED JUDGMENT OF JUDGE M J BEATTIE The issue in this appeal is whether the Experience Rating Assessment issued to the appellant on 20" of May 1998 was correct to include the attribution of the costs associated with the claim of the appellant's employee Keith Darragh for the full duration of that claim. whitexcavators.doc (sp) 2 BACKGROUND Keith Darragh was employed by the appellant as a machine operator and his duties included operating a large excavation machine. On the 16t of January 1995 Mr Darragh lodged a claim for cover in respect of acute discomfort from a lower lumbar sprain said to have occurred as a consequence of sitting on his excavation machine for long periods in an uncomfortable position. Cover was granted to the claimant and he was referred to Mr Calder, Orthopaedic Surgeon, for assessment who noted that he was complaining of tingling down the back of both calves and into the soles of his feet. Mr Calder requested an MRI scan. On the 24" of April 1995 Mr Calder advised the respondent of the claimant's condition and stated as follows: "[the claimant] has suffered from an exacerbation of a pre-existing back condition. He has a significant L5/S1 spondylolisthesis and has de-generation of the L4/5 disc. His current incapacity is due to the effects of the injury sustained on 14/1/95. The underlying condition he has is a spondylolisthesis of L5 on S1. He is unfit for work involving any jarring or lifting though would probably be fit for a sedentary desk type job. I enclose a copy of the MRI scan report. I am currently investigating a surgical option for him." On 30" of May 1995 Mr Robertson, Orthopaedic and Spinal Surgeon, advised Mr Calder of his assessment of the claimant for surgery and stated: "... I would agree that [the claimant's] pattern of pain is entirely consistent with symptomatic lumbar spondolosis at L4/5 and the isthmic spondolithesis at L5/S1. I think his on-going disability is likely to be prolonged and he has failed to respond to conservative cares and time. I think he is a candidate for a two level fusion. I have some concern about his nicotine intake and have discussed the matter with him". By a further letter dated 21" November 1995 Mr Calder advised the respondent of the claimant's present medical condition and stated: "In reply to your letter dated 5/10/95 / reviewed this man today. 1. His current condition is that he has on-going low back pain due to a combination of L4-5 de-generative change and L5-S1 on the spondylolisthesis with de- generative change. 2. The prognosis is that his pain will persist until surgery is carried out. 3. I consider that the on-going incapacity is due to the injury sustained on 14/1/95. 4 The spondylolisthesis may be contributing in part though he apparently had minimal symptoms before the above incident. whitexcavators.doc (sp) 3 5 . He is currently on the public hospital waiting list to have this procedure carried out and it is likely to be approximately 12-24 months away". Throughout this period the claimant was being certified as unfit to work and was in receipt of weekly compensation. The claimant remained on the surgical waiting list at Tauranga Hospital and save for him continuing to be certified as unfit for work by his GP nothing further occurred to resolve his injury in 1996. In March 1997 the claimant advised the respondent that he was working approximately 5-6 hours a week for the appellant in a restricted capacity but that he was not receiving any remuneration. The respondent thereupon sought further advice from Mr Calder as to the claimant's fitness for work on the basis that he had demonstrated an ability to work and Mr Calder reported to the respondent on the 29" of April 1997 and stated: "I saw this man today for the purposes of a report. His back continues much as before. With very little exercise or activity he has little pain but if he attempts to work in any physical way at all then he suffers some days from low back pain. He has attempted to work In a sedentary and non-paid capacity as a supervisor of maintenance of a plant operating company. This he manages reasonably successfully but his income from this is either non- existent or minimal. I consider that his current incapacity can be attributed to his work injury. I further consider that he needs a spinal fusion involving the lower two lumbar levels with pedicle screw fixation. He remains on the public hospital waiting list to have this operation carried out". The claimant's GP continued to certify the appellant as being unfit for work pending surgery. The respondent sought a second opinion from Mr C R Hooker, Orthopaedic Surgeon, and he examined the claimant on the 4" September 1997. Mr Hooker reported to the respondent on the 5" September and stated as follows: "Mr Darragh's incapacity is on the basis of a combination of a very longstanding abnormality in his lumbar spine, a lumbo-sacral spondolithesis with degenerative change, together with aggravation of the condition by the nature of his work, as outlined above, in January 1995. t is difficult to apportion the current disability between those two aspects, but it would reasonably be suggested, bearing in mind that prior to that time, Mr Darragh could undertake heavy manual work without difficulty, that the current condition be considered predominantly on the basis of aggravation by work in January 1995, particularly prolonged sitting and the jolting involved in jumping up and down out of the drain. This is not a lumbar sprain ... whitexcavators.doc (sp) 4 The degenerative change and the per-existing lumbo-sacral spondolithesis, as indicated above, would have to be considered to be significant pre-existing factors, but the trauma involved in prolonged sitting and jumping up and down out of the drain would have to be considered to be significant superimposed aggravating or precipitating factors. From the history given to me today, it is reasonable to accept that the nature of Mr Darragh's work in 1995 precipitated symptoms from these pre-existing conditions. The question of further treatment was a moot point. Whether or not a two-level lumbar fusion will enable Mr Darragh to return to his pre-accident work, could not be guaranteed. At this time, in my opinion, Mr Darragh is fit for a range of light work where he would not be required to sit for more than short periods, where he would not be required to lift or carry, or where there would be jolting or jarring of his lumbar spine. Some type of light, sedentary work in a factory or at bench, with the ability to vary his posture, would certainly currently be within the capacity". Mr Hooker's report was referred to the respondent's Branch Medical Adviser, Dr Shoemack, who formed the view that the previous specialists had appeared to overstate the effects of the claimant's injury of January 1995 and that it was only a minor triggering event which unmasked longstanding problems related to degenerative disease of the spine. Dr Shoemack said that the medical evidence did not support the claimant having a continuing entitlement for his January 1995 injury. On the 25" November 1997 the respondent advised the claimant that as a result of Mr Hooker's report and the advice of Dr Shoemack his entitlement to weekly compensation would cease as at 25" December 1997. The claimant did not seek to contest that decision and in fact became re-employed by the appellant. In March 1998 the respondent forwarded the appellant an Experience Rating Self Assessment and an Employer Claims History Notification. The appellant responded to those notices by contending that the respondent had failed to act on representations it had made for over 12 months that the claimant ought not to have been in receipt of compensation and that it was objecting to having the costs of his claim attributed to it. On the 11" of May 1998 the appellant wrote a letter to the respondent's Tauranga Branch stating: "We refer to the Experience Rating Self Assessment. We are not in agreement with the reasons already stated on numerous occasions. Keith Darragh has been kept on a ACC benefit despite our efforts to have his case reviewed. There was no doubt in our minds that Keith should have taken off the benefit before 1997. We believe that it is the responsibility of the ACC to make sure that cases under the ACC are genuine and if they are reported that they are investigated. We feel that this was not the case and that we are penalised for whitexcavators.doc (sp) 5 the year 1997, therefore are not willing to pay the resulting penalty. Keith is back in our workforce and we expect to have a reassessment due to the above circumstances" On the 25" May 1998 the respondent issued an Experienced Rating Assessment (ERA) which showed a loading of $23,867.13, due to the attribution of the claimant's costs for the full period that he was in receipt of weekly compensation. The appellant lodged an application for review of that decision and the matter came on for hearing before a review officer on 11" November 1998. At that hearing Mr Abrahamson, the managing director of the appellant and Mrs Chilwell, the office manager, gave evidence of how they had sought to advise the local branch of the respondent of the fact of the claimant was seemingly able to carry on a full and active life and they indicated that they questioned how he could continue to be in receipt of weekly compensation for incapacity when he was displaying no features of that incapacity. Considerable evidence was given on behalf of the appellant including evidence that requests had been made for a representative from the respondent to come and visit Whitianga to observe the claimant at first hand indulging in the various sporting and recreational activities that he participated in at the Mercury Bay Club, including inter alia, limbo dancing and rock- n-roll dancing. The decision of the review officer delivered on the 25" November 1998 is of little assistance to this Court as the review officer clearly misconstrued the legal position and mistakenly believed that the appellant was seeking to question an Employer Claims History Notification and that on the basis of a previous decision of this Court, it was not open to an employer such as the appellant to question such a notification as it did not constitute a decision. The Review Officer's decision was clearly wrong and is recognised so by counsel for the respondent. He is not seeking to defend the review officer's decision on that point but does defend the decision of the respondent as to its justification for maintaining the attribution costs of the claimant to the appellant's ERA for the full period of the claimant's claim. SUBMISSIONS Mr Abrahamson submitted that despite the various requests by his company to have the claimant's purported incapacity investigated on the basis of his active lifestyle whilst receiving weekly compensation, the respondent did not do so. Further he contended that the respondent did not make any attempt at rehabilitation of the claimant and it was his opinion that there had been no proper case management of this claim. whitexcavators.doc (sp) 6 Mr Abrahamson was particularly critical of the fact that no one from the Corporation took up the invitation to come and see firsthand exactly what the claimant was able to get up to despite his purported incapacity. In addition to affirming the evidence that had been given to the review officer, Mr Abrahamson produced statements from Whitianga residents who knew the claimant and who stated that they had observed the claimant living a full and active life. Mr Mccarthy, counsel for the respondent, submitted that the respondent had properly discharged its statutory duties and that it had correctly monitored the claimant's case. The respondent had medical advice that the appellant was incapacitated and that it was attributable to the January 1995 injury and that it could not go against that advice. Counsel submitted that this Court had previously ruled that for the Corporation to cancel a claimant's entitlements it had to have medical evidence which would establish there was no longer an entitlement and that until the respondent had received such advice from Mr Hooker no such evidence existed, therefore it was statutorily required to maintain payment of weekly compensation to the claimant. Counsel submitted that the jurisdiction of the Court to review decisions of the Corporation relating to the attribution of costs associated with a claim is limited to showing that the Corporation has failed to discharge its statutory duties or that the attribution complained of would cause manifest unfairness to the appellant. RELEVANT STATUTORY PROVISIONS 89. Application for Review (2) Any employer who is dissatisfied with a decision of the Corporation under section 65 or section 107 of this Act may apply to the Corporation for a review of that decision. (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; but no such right shall exist under this Act in respect of the [calculation] [for the purposes of the Income Tax Act 1994] of the [taxable] income of any person. (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. 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. whitexcavators.doc (sp) (2 ) The adjustment referred to in subsection (1) of this section shall be by way of a premium loading being imposed on the employer or a premium discount being allowed to the employer. (3 ) The basis of and procedure for adjusting the basic premium shall be that prescribed by regulations made under this Act. The Accident Rehabilitation and Compensation Insurance (Experience Rating) Regulations 1993 sets out the formula for the assessment of an employer's premium and included in that formula is factor (g) which is stated 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". DECISION The appellant's status in this appeal is that of an employer and as such it has only limited rights of review and appeal from decisions of the respondent which may indirectly affect it. The issue in this appeal does highlight the limitation of that right and the limited ability of the Court to interfere with the respondent's discretions as contained in section 104(1) and factor (g) in Regulation 5 of the Experience Rating Regulations. Section 89(4A) makes it clear that an employer has no right of review, and therefore appeal, from the respondent's decision relating to the payment of any entitlement to any person. Thus in the context of this present appeal the appellant has no right to question the weekly compensation that the respondent paid to the claimant from January 1995 to December 1997. The appellant's right is limited to questioning whether all or any of the payments made by the respondent to the claimant ought to be attributable to it in the context of factor (g) in the formula having regard, it says, to the justice and fairness of the case as borne out by the evidence as to the merit or otherwise of the claimant's entitlement to weekly compensation for that entire period. The interaction of section 104 with section 89(4) and (4A) has been considered by this Court in several decisions and these were referred to by counsel in submissions. In the decision of Wyatt and Wilson Print Limited (Decision 251/98) His Honour Judge Middleton had to consider this situation and he also had the benefit of previous decisions of this Court in Waipa District Council (97/96), Lane Walker Rudkin Limited (149/97) and Sandford Limited (160/97). whitexcavators.doc (sp) 8 In the Waipa District Council decision His Honour Judge Ongley stated: "If there is any discretion in section 104(1) it is a discretion whether or not to adjust the basic premium at all by reference to accident experience. Accident experience 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 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". In another passage in the Waipa decision His Honour stated: "If the Corporation acknowledged that by its own failure it was maintaining a liability to pay weekly compensation to the employee, it might well take that into account in deciding that qualified payments should not be laid of 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 section 89(4A) because it does not inquire 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 its statutory duty". In the decision of Sandford His Honour Judge Ongley considered that the circumstances where a manifest unfairness may occur unless a discretion was exercised to reattribute could also be applicable. Both these concepts, namely, manifest unfairness and failure to carry out a statutory duty were identified and approved by His Honour Judge Middleton in the Wyatt decision and I agree with those findings and they are principles which the Court must look to in the present appeal to determine whether the appellant is entitled to any relief from the attribution that was made by the respondent. In furtherance of the decision of Judge Ongley in the Waipa District Council case as to the scope of section 89(4) and (4A) I find that section 89(4) which gives a right of review and has associated with it section 91(2)(d), enables an employer who is dissatisfied with a decision under section 104(1) to have that decision reviewed, and thereupon have that review decision appealed. In that appeal it is open to the Court to examine the way in which the respondent has exercised its discretion and to look at it in the limited way in which an appellant can look at an appeal against the exercise of a discretion. The three principal grounds for interfering with the exercise of a discretionary power are: () Where the exercise of the discretion is done so on a wrong principle. It has ignored or misapplied the principle laid down in the statute or identified by earlier Court decisions. (if) That the exercise of the power of discretion has failed to take into account relevant considerations or conversely took into account irrelevant considerations. (ifi) Where the decision-maker has plainly made a wrong decision. Such a decision would need to be shown to be so aberrant that no reasonable person could have whitexcavators.doc (sp) reached it. This latter ground has now been taken to include a finding where the decision was improper, unjust or wrong. In this present appeal the appellant contends that the claimant was in reality fit and capable of carrying out his pre-accident tasks and that his physical condition ought to have been identified at least a year earlier than it was and payments of weekly compensation ceased accordingly. The appellant contends that its entreaties to the respondent were ignored or not actioned sufficiently rigorously to have discovered what it, the appellant says was the plain truth of the matter. The appellant contends that the observations of its officers and other persons of repute in the Whitianga community, that they had observed the claimant being engaged in various physical pursuits which they believed were incompatible with the purported physical disability he was suffering from is sufficient. On the other side of the coin the respondent contends it was monitoring the claimant's condition. On several occasions it obtained expert medical opinion as to whether the claimant was still suffering from the effects of his January 1995 injury and whether that injury was still causing him incapacity. In between the times of those expert opinions, it contends that it was bound to rely on the certification from the appellant's GP in the various ARC 18s which it received at three monthly intervals, and that as and until it was in possession of medical evidence that the appellant was no longer suffering from the effects of the personal injury for which he had cover it was duty bound under the provisions of the Act to make payment to the claimant of the entitlements which that Act gave the claimant. Considering the chronology of the obtaining of information which the respondent sought from its medical advisors, I find that it cannot be said to have been in dereliction of its duty. It had the advice of Mr Calder as to the appellant's incapacity. It had the further advice of Mr Robertson, Spinal Surgeon, that the appellant was in need of an operation and that the reason for that operation was the injury he had suffered and there were the follow-up reports from Mr Calder, Orthopaedic Surgeon in 1997. It is to be noted that the respondent had the advice of Mr Calder of 29th April 1997 that the appellant was incapacitated and that his current incapacity was attributable to his work injury and that this was likely to be the case until he had his operation. Nevertheless, inspite of that and inspite of the continued certification from the claimant's GP the respondent did seek a second opinion from an Orthopaedic Surgeon. It was only on receipt of Mr Hooker's whitexcavators.doc (sp) 10 opinion that the respondent was persuaded to the view that the appellant could no longer be considered incapacitated as a consequence of personal injury by accident. In those circumstances I find that the respondent has acted responsibly and with regard to the rights of both the claimant and the appellant insofar as their respective and competing interests were concerned. Under the provisions of section 73 of the Act the respondent is only entitled to cancel an entitlement to a claimant when it has in its possession information that that person is no longer entitled to receive that payment. If the respondent had acted and exercised its powers under section 73(1) in advance of receiving the advice from Mr Hooker and supported by the respondent's Branch Medical Advisor, the respondent would have been in breach of its duty to the claimant and it certainly could not have been said to have been acting in accordance with its duty to the appellant. Whilst the observations of Mr Abrahamson and other people at Whitianga may be a pointer to a state of affairs, they remain nothing more than that and until the respondent was in possession of proper and credible medical evidence I find it could not have acted upon the appellant's request. Any action it would have taken would have been wholly premature. . On the facts of this case I find that the appellant cannot establish any manifest unfairness or breach of statutory duty or any of the criteria normally associated with an alleged wrongful exercise of a discretion. Therefore the decision of the respondent to attribute the whole of the claimant's claims costs to the Experience Rating of the appellant for the purposes of employer premium for the year ended 31" March 1998 was correct. Accordingly this appeal is dismissed. DATED at WELLINGTON this ist" day of July 1999 M J Beattie District Court Judge whitexcavators.doc (sp)