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Urlich v Accident Compensation Corporation [2006] NZACC 165 (5 July 2006)

IN THE DISTRICT COURT
HELD AT WELLINGTON

Decision No. 165/2006

UNDER The Injury Prevention, Rehabilitation,

and Compensation Act 2001

IN THE MATTER of an appeal pursuant to Section 149

of the Act

BETWEEN GRAEME WILLIAM URLICH

of Tauranga

Appellant

(Appeal No. AI 581/05)

AND ACCIDENT COMPENSATION

CORPORATION a body corporate

duly constituted under the provisions of the said Act

Respondent

HEARING at TAURANGA on 6 June 2006

APPEARANCES/COUNSEL

Appellant in person

AD Barnett for respondent

RESERVED JUDGMENT OF JUDGE J. CADENHEAD

THE ISSUE

[1] This appeal arises from decisions made on 1 June 2005 determining the amount of backdated weekly compensation payable for the period 5 February 2004 to 31 March 2005. The decisions determined the gross weekly compensation, less the amount payable to WINZ, less tax. The payments to the appellant were made on 1 and 7 June 2005. The WINZ information was received on 2 June 2005.
[2] The appeal also concerns a separate decision of the Corporation made on 15 August 2005 declining to pay interest on the backdated weekly compensation on the basis that the compensation had been paid within one month of receiving all necessary information.
[3] The decisions of the respondent were upheld by a review decision dated 4 November 2005. The respondent, however, has since agreed to and paid interest on the backdated weekly compensation so the interest decision is not now in issue. Mr Urlich does however separately claim interest on borrowing and other matters.
[4] At the review hearing, the appellant has also raised various concerns and claimed losses asserted to arise from the Corporation’s “wrongful action” or management of his claim for weekly compensation.
[5] Since the review decision, the Corporation in addition to the interest payment, has made a payment of $6,394.70 as an ex-gratia payment on Mr Urlich’s “wrongful action” claimed for losses associated with the delayed payment of weekly compensation at the time it was claimed.
[6] On appeal, it seems that the issues are now narrowed to the appellant’s “actual costs” and “exemplary damages”. The appeal is “essentially to establish the quantum of restitution based on actual costs and reasonable estimates” and the correct calculation of interest.

THE BACKGROUND OF FACTS

[7] The appellant has a covered claim for injuries sustained in December 1993 in respect to a motor vehicle accident. There were problems concerning the appellant’s entitlements, and in May 2005 a review decision upheld the appellant’s contentions. This decision ruled that the respondent should base the appellant’s weekly compensation on his earnings as an employee immediately prior to 24 July 2002, the date of his first incapacity. The appellant furnished the respondent with further information as part of the review process.
[8] The respondent received the review decision on 13 May 2005 and proceeded with gathering the relevant information to reassess and calculate the appellant’s weekly compensation. This process included obtaining copies of tax returns, invoices and calculations for reimbursement to Work and Income New Zealand (WINZ).
[9] WINZ provided the respondent with a calculation for reimbursement by 2 June 2005. These calculations showed a breakdown of the reimbursement as follows – net $4,097.39, gross $4,820.41, supplementary $2,080.00 total for reimbursement $6,177.39.
[10] WINZ was reimbursed on 7 June 2005 with $6,900.41. This was the gross amount of $4,820.41 plus the supplementary amount of $2,080.00 which was the total amount of $6,900.41.
[11] On 1 June 2005 the respondent released a payment of $1,268.14 to the appellant for the period 23 May 2005 to 31 May 2005. The appellant released the full calculation of $44,042.96 net to the appellant on 7 June 2005.
[12] The appellant did not agree with the respondent’s decision and lodged applications for review on these decisions.

THE REVIEW DECISION

[13] The review decision dated 4 November 2005 dismissed the application for review. I set out the conclusion of the reviewer hereunder:

“Conclusion

ACC is liable to reimburse WINZ with the amount paid out for the benefit of Mr Urlich. This includes tax paid to IRD as it is required by law that Mr Urlich should pay tax.

ACC submitted that Mr Urlich’s weekly compensation was calculated correct and the WINZ reimbursement was in accordance with the process agreed by ACC, IRD and WINZ.

This is the process followed by ACC, as IRD will refund Mr Urlich with the tax previously paid by WINZ. ACC is therefore required to deduct the gross amount from Mr Urlich’s weekly compensation and reimburse that amount to WINZ. Although WINZ indicated the net amount to be reimbursed, I find that ACC reimbursed WINZ with the correct amount, i.e. the gross amount. This is because that was the amount paid out by WINZ to the benefit of Mr Urlich.

ACC is liable to pay interest, pursuant to Section 114 of the Act, where payment of weekly compensation is not made within one month of ACC receiving ‘all information necessary to enable the Corporation to calculate and make the payment.’

The onus is on Mr Urlich to establish, on the balance of probabilities, that he is entitled to payment of interest from an earlier date.

This issue turns on the date that ACC had all information necessary to enable it to calculate and pay weekly compensation to Mr Urlich. ACC issued an earlier decision which was quashed in Mr Urlich’s favour in May 2005. The review decision was received by ACC’s branch in Tauranga on 13 May 2005.

The date that ACC had received all information necessary to make calculation and payment to Mr Urlich was on 2 June 2005, i.e. was the information regarding reimbursement to WINZ.

The calculations and payments for Mr Urlich’s weekly compensation were completed by 07 June 2005, within the timeframe of the Act.

The above was not disputed by Mr Urlich. Having had regard to the detailed submissions from the parties as well as all the relevant documents on Mr Urlich’s file, I find that ACC’s position is correct in law.

The applications for review are dismissed.”

LEGAL PRINCIPLES

[14] Section 133(4) of the Injury Prevention, Rehabilitation, and Compensation Act 2001 provides:

“A review decision is subject to s.161 (the Court’s powers to determine an appeal).”

[15] Section 161 of the Act provides decisions on appeal –

(1) The Court must determine an appeal by -

(a) dismissing the appeal; or

(b) modifying the review decision; or
(c) quashing the review decision.”
[16] From these sections it is clear that the Court in determining an appeal has a confined jurisdiction as to what it can do, and that jurisdiction is set out by the types of orders that can be made pursuant to s.161(1) of the Act.
[17] Pursuant to s.140(c) of the Act a reviewer must conduct the review in a way that complies with the principles of natural justice. The right to natural justice is also applicable to any tribunal or other public authority which has the power to make a determination in respect of that person’s rights, obligations or interests pursuant to s.27 of the New Zealand Bill of Rights Act 1990.
[18] Section 27(2) affords relief if a person has been affected by the determination of any tribunal or other public authority. The person has the rights to apply in accordance with the law for judicial review of that determination, and 27(3) provides a person with a right to bring civil proceedings against the Crown and to have those proceedings heard according to law, in the same way as civil proceedings between individuals.
[19] Having regard to the above statutory principles, the cases of Denzel (CP 135/02, High Court, Wellington – judgment 29 October 2002, France J) and Howard v Accident Compensation Corporation [2003] NZAR 577 distil the following principles:

• [i] Breaches of natural justice going to the process by which a primary decision was made, or a review decision may be within the province of an appeal hearing.
• [ii] However, not all breaches of natural justice and their consequences are within the jurisdiction of an appeal under this legislation. For example, this Court has no power to award damages or to make orders in respect to consequential interest claims. By way of illustration in Denzel (supra) France J said:

“In terms of the specific case, there is no reason why the matters in issue in the present judicial review proceedings cannot be dealt with through the review/appeal process and the effect of the relief sought obtained. In terms of relief, there is no equivalent in the review/appeal process to the injunctive relief sought to prevent the defendant from re-using s 73 in relation to the plaintiff. The plaintiff argues in this respect that the defendant ignored her rights after the reviewer’s decision on 24 May 2001 and is concerned to avoid any repetition. However, the defendant accepts, as of course it must, that the plaintiff on review/appeal will have her rights if she is successful.”

[iii] Generally breaches of natural justice will not ground a cause of action for damages. In this respect I cite from De Smith, Woolf and Jowell, Judicial Review of Administrative Action:

“The failure of a public body, contrary to the principles of natural justice, to give a person a proper hearing before making a decision does not, of itself, give rise to a cause of action for damages. Where a contract exists between the parties, such as a contract of employment, contravention of a principle such as audi alterem partem may amount to a breach of an express or implied term of the contract; but where there is a contractual relationship of this sort, judicial review will not normally lie. In order to recover damages in the public law arena, the aggrieved person will need to show that the procedural impropriety or other unlawful administrative action also constituted an actionable breach of statutory duty, misfeasance in public office or other recognised civil wrong.”

[20] However, in New Zealand this principle must be modified in that under the Bill of Rights legislation pursuant to the principles of Simpson v Attorney-General (Baigent’s case) [1994] 3 NZLR 667 (CA) a new remedy of damages may attach to a breach of natural justice.
[21] In Townsend (AI 464/04) I said:

“At the hearing I explained to the appellant that the scope of this appeal was limited and was not concerned with his wrongful damages claim and allegations that both the ACC and DRSL had put the appellant to emotional trauma. These allegations arose out of the handling and alleged insensitivity suffered to him through the handling and processing of his claim, and for not meeting the time frames required by the District Court. Further, I could not entertain on this appeal his claims for physical and mental harm pursuant to the Health and Safety Act 2002 part 2 Clause 8.

In my view, these issues are wrongly conceived as one for appeal in front of me. I am sitting on appeal, these particular issues are outside the purview of review powers. The type of issues that the appellant is raising are within the province of the common law, or judicial review and would require findings of credibility, and a detailed evaluation of the facts concerning those allegations. None of those courses are open to me at an appeal level. The only issue available to me is the correctness of the method of calculation of the independent allowance.”

[22] Pursuant to section 161(1) of the Act it is clear that there is no power in this Court to award damages, or consequential losses, or consequential interest.

SUBMISSION OF THE RESPONDENT

[23] In this jurisdiction, namely an appeal against the decision of the Corporation concerning the statutory accident compensation entitlements, there are broadly two limitations:

• [a] First; the Court’s jurisdiction is confined to the scope of the primary decision which, in this case, is the calculation of weekly compensation and the entitlement to interest.
• [b] Second; the Court has no jurisdiction to consider claims outside of the specific statutory entitlements to compensation which the Act provides for. Thus, for example, in an appeal under the Act, the Court has no jurisdiction to consider claims for exemplary damages or for losses that are not provided for under the Act.

[24] The respondent submits that there is no jurisdiction for the Court on this appeal to consider the claims now advanced by Mr Urlich, namely:

• [a] Loss of earnings over and above that provided for in the Act, i.e. 80% of pre-accident earnings.
• [b] Increased tax liability arising from the back payment of weekly compensation which payment is made in one tax year, rather than over two or more years.
• [c] Lost opportunity to claim “family assistance”, this being a form of income support provided by the State.
• [d] Interest on borrowing.
• [e] Loss associated with deferred property maintenance.
• [f] Exemplary damages.
• [g] Claims concerning the conduct of the Corporation, e.g. negligence or misfeasance in public office.
• [h] General damages for loss of enjoyment of life.

[25] The respondent submits that there are two issues which are consequential upon the primary decisions of 1 June 2005 and which may arguably come within the jurisdiction of this appeal and deals with them as follows:

• [a] First; there is the refund to WINZ of the benefit it had paid to Mr Urlich – that refund being the gross sum WINZ had paid. It appears Mr Urlich contends that the net sum only ought to have been refunded, thus he claims an overpayment of $793.
• [b] Second; there is the question of incidence of income tax on weekly compensation, and in particular where that compensation is repaid in one tax year, but in respect of an entitlement accruing over more than one tax year.

The first consequential issue: the WINZ payment.

[26] Pursuant to s.252 of the IPRC Act 2001, the Corporation’s obligation is to refund WINZ with the excess benefit payment it has made. The backdated weekly compensation disentitled Mr Urlich to the WINZ benefit he had received and the Corporation is obliged to refund to WINZ all of the benefit it paid. The benefit WINZ pays is a gross sum, but in two parts, the tax is paid to IRD and the net sum paid to the beneficiary.
[27] The Corporation properly refunded to WINZ the benefit it had paid. If WINZ paid tax on the benefit, then the IRD must refund that tax. Whether the IRD makes the refund to WINZ who in turn passes it on to the beneficiary, or whether the IRD pays it direct to the beneficiary, is not a matter within the scope of the Corporation’s obligations or duties under the Act.
[28] Thus, the Corporation acted correctly in refunding the gross amount of the WINZ benefit, to WINZ and any tax consequences lie outside its obligation.

The second consequential issue: tax on weekly compensation.

[29] The incidence or rate of tax payable is essentially an issue for the IRD and beyond the statutory obligations of the Corporation. Weekly compensation is taxable income, and the rate of tax payable is assessable by the IRD under its legislation (the Income Tax Act). If the amount of tax deducted is disputed then the dispute is with the IRD and the taxpayer’s remedy is to ask the Commissioner of Inland Revenue to make a reassessment.
[30] Although the rate of tax is within the province of the IRD, for the assistance of claimants in the position that Mr Urlich was in, the Corporation does advise that the claimant may apply to the Inland Revenue for a special tax code or other tax options available. This advice was provided to Mr Urlich in the decision letter of 1 June 2005.
[31] But whether or not the Corporation made the correct tax deduction in payment to IRD, the appellant’s remedy is with the IRD, not with the ACC.
[32] The respondent submits that the majority of Mr Urlich’s claims on appeal lie squarely outside the jurisdiction of the Court in this appeal.
[33] The refund of the WINZ benefit by the Corporation and the payment of income tax to IRD made by the Corporation are actions taken by the Corporation consequential upon the decision to calculate and pay weekly compensation, and may be within the jurisdiction of the Court, but the Corporation’s decisions and actions were not in error and if the appellant has any remedy, it is with WINZ and/or the IRD as the case may be.

THE SUBMISSIONS OF THE APPELLANT

[34] The appellant submits that the respondent has knowingly chosen to make and attempt to uphold a decision that was clearly outside the statutory provisions.
[35] The respondent has subsequently offered the appellant some minimal compensation, outside the provisions of the legislation, but has not recompensed the appellant with full damage resulting from the respondent’s wrongful decision and subsequent actions.
[36] The appellant submits that the principle of natural justice brings every aspect of his case within the jurisdiction of this court and this proceeding. An appeal is by way of a “full rehearing” of the review. The review officer failed to apply the principle of natural justice by ignoring the issues of actual cost and exemplary damages in his decision.
[37] The appellant further submits that the concept of natural justice is an ancient and far reaching principle. It holds that basic legal principles are required by nature, or that they are so obvious that they should be universally applied without needing to be enacted into law. It is the notion that logical reasoning may allow the determination of just, or fair processes in legal proceedings.
[38] Natural justice is a concept that refers to situations where audi alteram partem (the right to be heard) and nemo judex in parte sua (no person may judge their own case) apply. The appellant submits that the principles of natural justice were derived from the Romans who believed that some legal principles were "natural" or self-evident and did not require a statutory basis. These two basic legal safeguards govern all decisions by judges or government officials when they take quasi-judicial or judicial decisions
[39] Following from this reasoning the appellant submits that it follows that no legislation or regulation should be interpreted in such a way as to subvert this principle. This principle brings an obligation upon this Court to apply logical reasoning to this case and to act swiftly to end the harm that the respondent’s wrongful action continues to wreak.
[40] It is submitted that in this instance the respondent is judging its own case, and hence the request for the judgment of an independent authority with jurisdiction to rule. It is submitted that the Technical Claims Manager at the Tauranga branch knowingly made an illegal decision.
[41] The appellant submits that the respondent continued to try to uphold its decision even after it was pointed out to them where their decision was incorrect. The appellant alleges that the respondent used delaying tactics, diversion and outright dishonesty to try and uphold and support its decision.
[42] The respondent was fully aware of the threat that its decision caused to his home and the damaging affect that the stress was having on his already poor health throughout the entire process. The various letters and medical reports on file confirm this. It is submitted that the respondent’s actions were founded in cost saving rather than the medical/psychological needs and rights, as is the respondent’s obligation to uphold in the legislation.
[43] It is both fair and reasonable to expect any wrong doer, especially one that has acted deliberately to deny entitlement, and has caused significant and quantifiable harm, to make full restitution for their actions. The appellant submits that the actual costs in this case are substantial The effect of respondent’s actions continues to have a serious impact on his health with substantial flow-on effect to his family relationships. The awarding of actual and exemplary damages will not in itself bring back his health but it will remove a substantial amount of the stresses and strains that afflict him, affording him the best opportunity to restore some normality to his life.
[44] On the balance of probability, it is unlikely that the appellant will ever be able to resume a full time professional career. He has lost a career of thirty years and as he still has eighteen years until retirement age, this is a huge loss of potential earnings. The appellant was on a salary close to $100,000 pa as well as having business opportunities before he had to stop work.
[45] The appellant submits that substantial restitution will afford his family the opportunity to recuperate and move forward. It will afford appellant the opportunity to build a new income stream to secure their futures.

DECISION

[46] In my view there is simply no jurisdiction to deal with bulk of the appellant’s claims for damages, consequential losses and interest. However, the appellant may be entitled to a recalculation of his interest if the present Robinson appeal is upheld by the Court of Appeal and I direct that when that decision is to hand (that if necessary) fresh calculations are made by the respondent in accordance with that decision. These calculations would be in the nature of a new decision and would attract review rights.
[47] I agree with the submissions of the respondent that the appellant should take up the issues of WINZ and income tax payments with the bodies administering those decisions rather than with the respondent.
[48] At the hearing the appellant produced a letter marked without prejudice and the respondent objected to the production of that letter. It is accordingly noted that privilege has not been waived in respect to the contents of that letter.
[49] For the reasons that I have given I dismiss the appeal. There will be no order as to costs.

DATED at Wellington this 5th day of July 2006

(J Cadenhead)

District Court Judge