Wyatt and wilson Print Limited v Accident Rehabilitation and Compensation Insurance Corporation

IN THE DISTRICT COURT HELD AT WELLINGTON Decision No. 251 /98 UNDER The Accident Rehabilitation and Compensation Insurance Act 1992 AND IN THE MATTER of an appeal pursuant to section 91 of the Act BETWEEN WYATT AND WILSON PRINT LIMITED of Christchurch Appellant (Appeal No. DCA 199/98) AND ACCIDENT REHABILITATION AND COMPENSATION INSURANCE CORPORATION a body corporate duly constituted under the provisions of the said Act Respondent HEARING at CHRISTCHURCH on the 22nd day of October 1998 APPEARANCE/COUNSEL O G Paulsen for appellant K Tahana for respondent RESERVED JUDGMENT OF JUDGE A W MIDDLETON This appeal is against the decision of the review officer which confirmed the respondent's primary decision to impose a premium loading of $4,562.01 on the appellant company for the financial year 1996/97. The issue arose after Wyatt and Wilson Limited sold its business as a going concern to the appellant which was incorporated under the name Wyatt and Wilson Print Limited. The purchase took place during 1994. Ms Miller worked as a bindery assistant for Wyatt and Wilson Limited and injured her right index finger and middle fingers in a staple machine on 30 May 1994. As a result she was certified as being unfit for any type of work until 15 Au gust 1994 when her surgeon 2 certified that she was fit for selective or alternative work. Her then employer then stated that there were no light duties available for Ms Miller and on 24 August 1994 Ms Miller's specialist notified the respondent: "I do feel that Tania will in time be able to resume her full duties as a bindery assistant but this could be anywhere between two weeks and three months". The file records that Ms Miller was then pregnant and expecting a baby in March 1995 as a result of which her then employer notified the respondent on 23 September 1994 that she was not able to perform her duties because of her pregnancy. On 28 September 1994 Ms Miller advised the respondent that she was not prepared to return to work with her former employer because she was frightened of the principal of that firm and was scared to work there and was also concerned that she might be dismissed because of her pregnancy. The employer then notified the respondent on 29 September 1994 that it was prepared to provide Ms Miller with light duties but that she had refused to return to the employer. Ms Miller's case manager then recommended a cessation of weekly compensation. On 11 October 1994 Ms Miller resigned from her employment. A record on the file on 3 November 1994 from Ms Miller's case manager confirmed the fact that she was fit for light work but had resigned and was being referred for a work capacity assessment. A work capacity report on 25 November 1994 confirmed that Ms Miller had problems because of her pregnancy and was "work fit for many low-hand loaded jobs". Further rehabilitation assistance and earnings related compensation was suspended on 3 March 1995 because of Ms Miller's pregnancy. In March 1996 Ms Miller requested her case manager to reinstate rehabilitation and other assistance. A file note in June 1996 indicated that the appellant had had a work trial at "Dress for Less" which she enjoyed and was work with which she was able to cope. Ms Miller then obtained employment with Dress for Less from July 1996 and received abated earnings related compensation. On 21 August 1996 the respondent notified the appellant that the claims history of Wyatt and Wilson Limited had been attributed to it. The appellant questioned this decision. The appellant wrote to the respondent on 5 December 1996 requesting an up-dated specialist's report on Ms Miller's condition. The appellant made a further request on 27 February 1997 as to the respondent's action in regard to Ms Miller's rehabilitation and requested an up to date specialist's report. Although an appointment was made to see the specialist on 26 May 1997 Ms Miller did not keep that appointment. A further appointment was made on 4 August 1997. The specialist reported: "Though Tania is theoretically fit for many types of work, she is also very anxious about going back to the type of machine work that caused this injury. I feel she is not actually fit for work as a bindery assistant. Because of the middle finger being flexed and awkward with the unstable skin, she may tend to knock it causing pain and catch it on the machinery. I do feel that Tania is fit for fulltime work that does not involve machine work. ..... Tania has developed somewhat of a phobia towards sewing machines and such like." 3 On 28 November 1997 the respondent issued its experience rating assessment which is now the subject of this appeal. The appellant applied for a review of the assessment decision which was declined by the review officer. The review officer found that while s.89(4A) did not bar consideration of whether the respondent by its own acknowledged failure was maintaining a liability to pay weekly compensation, the evidence did not persuade her that there had been any acknowledged failure of the respondent to carry out its statutory duty. She further found that the payments made on Ms Miller's claim were "qualifying payments" because there was no evidence that the costs were not associated with the qualifying claim and that the formula in Regulation 5B had been correctly applied. She found that there was no discretion to remove some of the qualifying payments when calculating the respondent's premium liability. Mr Paulsen submitted: 1. That s.104(1) provides a discretion concerning the imposition of premium loading which was acknowledged by Judge Ongley in Waipa District Council v ACC (1996/97). 2. That Regulation 6(2) of the Accident Rehabilitation and Compensation Insurance (Experience Rating) Regulations 1993 provides a discretion to the Corporation as to whether to attribute qualifying claims from one employer to another employer and that this issue was also the subject of a decision by Judge Ongley in Sandford (South Island) Limited v ARCIC (160/97). 3. That in determining whether there is to be a premium loading under Regulation 5B, the respondent must give consideration to whether claim costs are qualifying payments. In that regard the decision to regard a payment as a qualifying payment is not one that can be made arbitrarily and there must be a true connection between the payment and the work injury. That the decision of the respondent to draw the connection is one which could be the subject of review as was found by Judge Ongley in Lane Walker Rudkin Limited v ARCIC (149/97). Ms Tahana submitted: 1. That the respondent has a discretion under s.104 as to whether to adjust a premium payable under s.101 and that any premium adjustments must be made in accordance with the procedures prescribed by the regulations. That as the respondent followed the procedure prescribed in Regulation 5B it acted within its powers when making the experience rating assessment for the appellant. 2. That in relation to the discretion under s.104 there is no requirement on the respondent to take into account broad considerations of fairness when making the adjustment to the appellant's premiums. It must follow the procedure in Regulation 5B of the regulations. 4 3. That the respondent correctly reattributed Wyatt and Wilson Limited's claims history to the appellant in accordance with Regulation 6(2) as the business was purchased as a going concern. That in doing so there is no manifest injustice to the appellant and that the observations by Judge Ongley in the Sandford case are distinguishable because in that case the accident involved occurred before the introduction of the 1992 Act and the employer would not have been aware of the effect of the Act in relation to the previous accident. 4. That the Court is not entitled to have regard to the claim that the respondent acted in breach of its statutory duty by considering to pay Ms Miller weekly compensation. 5. That the appellant is seeking to use s.89(4A) to attack Ms Miller's entitlement to receiving weekly compensation. Section 104(1) of the Act provides: "The basic premium payable under s. 101 of this Act by an employer may be adjusted by reference to the accident experience of or attributed to that employer. " (my emphasis) Judge Ongley considered this section in the Waipa District Council case where he said: "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." In that decision he also said: "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 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 particular payments, but whether or not to make any adjustment whatever in respect of all of the accident experience of the employer affecting a particular premium year." I agree with Judge Ongley's comments. I consider that the respondent does have a discretion in regard to the imposition of a premium loading on the basis that it could decide not to apply the work history of Wyatt and Wilson Limited to this appellant. As it happens the only work history which was the subject of attribution was Ms Miller's claim. The issue however goes further when one considers the requirements of Regulation 6(2) of the Accident Rehabilitation and Compensation Insurance (Experience Rating) Regulations 1993 which reads: '(2) Notwithstanding that a qualifying claim is, or is deemed to be, attributable to an employer or, in the case of a company which is a member of a specified group would, but for the application or regulation 12(1)(c) of these regulations, be or be deemed to be attributable to that employer (referred to in this regulation as the first employer), the Corporation may deem 5 that qualifying claim to be attributable to one or more other employers, or to such other employers and the first employer (together referred to in this regulation as the second employer), with effect from such time as the Corporation may specify, if the qualifying claim related to a personal injury by accident or work injury that occurred in the course of employment which - (a) Was in respect of an activity carried on by the first employer where all or part of that activity has been transferred as a going concern to the second employer;" Again this regulation was considered by Judge Ongley in the Sandford case where he stated: "Regulation 6(2) describes the circumstances in which reattribution can be made, and in that subclause there is the discretionary 'may' which accords with s.104 of the Act. The appellant's submission is that the discretion is not entirely controlled by ss(1) but is to be exercised in a manner that is appropriate to the circumstances of the case. There is some force in the appellant's submission that the discretion should be exercised as appears appropriate. The expression 'as appears appropriate' is used in s.5(c) of the Act in a slightly different context, that is to say that the basis or the period of attribution should be provided by regulation as appropriate. That appropriateness is likely to be linked to policy factors, whereas the question of appropriateness of exercise of the discretion in this case is directed at the circumstances of an individual transaction. There must be circumstances where a manifest unfairness may occur when, for example, an activity was acquired by a conscientious employer from an employer with a deplorable accident history, before enactment of s. 104 of the Act. ... The exercise of the discretion to reattribute premium loading should involve the application of the policy of the Act and take account of the circumstances of the qualifying claim, the attitude of the former employer to its responsibilities and balance the effects of the burden that the claim would place on the new employer or on the former employer or on the Employer's Account." The review officer had held that payments made to Ms Miller were qualifying payments and as such could not be the subject of review. The definition of a qualifying payment under the regulations is: "Qualifying payment - (a) Means 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 regulation 6 ....." For the purposes of the regulations, a qualifying claim is a work injury claim which has been lodged in respect of employment with the employer which is accepted by the respondent. While the review officer concluded that a qualifying payment cannot be the subject of a review, Judge Ongley held in the Lane Walker Rudkin case that a qualifying claim may be considered in the course of the review of the accident experience component of premium rating under s.89(4). He found that s.89(4A) only prohibits a review of the entitlement decision but is capable of permitting a review which would have a consequential indirect effect on entitlements. In the Waipa appeal Judge Ongley commented (obiter) on the application of ss.89 and 89(4A) when he said: '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." The appellant purchased the business as a going concern without any knowledge of Ms Miller's claim. However, a lack of knowledge of the claim and its implications on subsequent experience rating costs does not bar the respondent from imposing the premium loading on the appellant. I consider that there is certainly a discretion under s.101 which does permit the respondent not to make the attribution from the previous employer to the appellant. Again, Regulation 6(2) of the regulations provides a discretion for the respondent whether or not to attribute a claim made in respect of the previous employer to the appellant. As Judge Ongley indicated in Sandford there could be circumstances where a manifest unfairness can occur following the transfer of an activity to a conscientious employer by an employer with a deplorable history. While it is not suggested that the previous employer in this case who was the employer of Ms Miller at the time of her accident had a deplorable accident history, this particular appellant has an unblemished history and was unaware of Ms Miller's situation which has now been the subject of the imposition of the additional premium loading. I agree with Mr Paulsen's submission that having regard to the wording of the definition of " qualifying payment" there is a need for there to be an "association" between the payment and the work history and that the entitlement to consider that factual situation was confirmed by Judge Ongley in the Lane Walker Rudkin case. The circumstances of this case were unusual in that while the accident occurred when Ms Miller was in the employ of the previous employer she subsequently resigned from that work either because of her pregnancy or because of her desire not to continue to work for that employer with whom she had some difficulties. She was certified as fit for selected work and when this subsequently came to the knowledge of the appellant it offered her work commensurate with her then ability but she declined that offer. The appellant made very effort to investigate the true position when it received notification of the imposition of the premium loading but there were certainly delays in obtaining details of Ms Miller's then physical condition, during all of which time the respondent continued to pay her weekly compensation. While it cannot be said that the respondent failed to carry out its statutory duties there was certainly a considerable delay before the true position of Ms Miller's physical condition was ascertained and even the appellant's own account manager expressed some concern that this appellant was being unfairly subject to the imposition of the ongoing costs of the claim. A file note made by the branch manager on 15 December 1997 states: 7 "The employer a number of concerns about the ongoing costs of this claim - I have some sympathy for him in that once this client was required to work full time she opted to go to Social Welfare - it could well be that client was no longer available for full time work because of her children etc - client was certified fit for full time work back in late 1994 so it appears that the Corporation has not been very diligent in managing the costs of this claim." I consider that there has been a manifest unfairness to this appellant in the manner in which Ms Miller was permitted to continue to receive weekly compensation when she had resigned from her position, apparently because of her pregnancy but then subsequently received weekly compensation. Thereafter there was delay in obtaining specialists' reports and this delay has added to the costs incurred. While it is acknowledged that there is a duty on all employers to fund the respondent's activities by the payment of premiums, the question of reattribution from one employer to another also has to be made in fairness to the new employer. I consider that in this appeal there is a manifest unfairness if the premium loading for Ms Miller's claim is attributed to this appellant. Certainly that portion of the claim which preceded Ms Miller's resignation is properly reattributed to the appellant but after the reinstatement of payments in March 1996 I consider that the delays in completing the investigation incurred payments which it would be manifestly unfair to attribute to the appellant. There is ample discretion under the Act for the respondent not to attribute the accident experience of the previous employer to this appellant simply by using the discretion provided by s.104(1). The appeal is therefore allowed. There will be costs to the appellant of $850. DATED at WELLINGTON this Is- day of December 1998 A W Middleton District Court Judge Dca19998.doc (rd)