BEFORE THE ACCIDENT COMPENSATION APPEAL AUTHORITY AT WELLINGTON

BEFORE THE ACCIDENT COMPENSATION APPEAL AUTHORITY AT WELLINGTON [2014] NZACA 02 ACA 10/13 IN THE MATTER AND IN THE MATTER BETWEEN AND of the Accident Compensation Act 1982 of an appeal pursuant to s.107 of the Act CLAIRE HOLLIS Appellant ACCIDENT COMPENSATION CORPORATION Respondent HEARING: 27 November 2013 at Wellington AUTHORITY: Robyn Bedford COUNSEL: C Hollis for appellant P McBride for respondent DECISION [1] The appeal concerns the Corporation s decision dated 25 January 2013, in which it calculated Ms Hollis weekly compensation under the Accident Rehabilitation and Compensation Insurance Act 1992, so as not to include the holiday pay she received on termination of her employment in her earnings for the purposes of paying weekly compensation. The issues [2] Ms Hollis contends that because she has cover for her injury under the Accident Compensation Act 1982, this Act should apply and that following the decision of Judge Beattie as the Authority in Davis v ACC 1, her New Zealand holiday pay should be included in her gross income as at 30 October 1988, for the purpose of calculating her compensation. [3] Mr McBride contends that the decision was correctly made under the 1992 Act and the Authority has no jurisdiction to entertain the appeal, but in any case, the District Court has correctly held that holiday pay cannot be included as earnings for 1 [2012] NZACA 1

2 the purpose of calculating weekly earnings under the later legislation and this applies equally to calculating earnings under the 1982 Act. Background [4] Ms Hollis claim is complicated by the timing of material events and the number of Acts involved in the compensation assessment process which I have set out briefly below to explain the jurisdiction decision: The accident occurred in April 1992, when the Accident Compensation Act 1982 was in force. Incapacity commenced on 15 October 1996, when the Accident Rehabilitation and Compensation Insurance Act 1992 was in force. Ms Hollis employer was in the Employer Reimbursement Scheme and she received full income from 22 October 1996 to 30 October 1998. The application for backdated weekly compensation was made in August 2001 and declined in January 2002, when the Accident Insurance Act 1998 was in force. Following two review decisions, one issued under the 1998 Act and the other under the Accident Compensation Act 2001, ACC issued the weekly compensation decision in July 2003, also applying the 2001 Act. The earnings ACC used to calculate weekly earnings for the purpose of paying weekly compensation were for the period from 19 September 1996 to 16 October 1996, updated for relevant Order in Council increases, when the 1982 Act was in force. The weekly compensation payments were backdated to the periods from 2 November 1998 to 25 May 1999 which came under the 1992 and 1998 Acts, and from 26 February 2000 to 27 April 2003, which came under the 1998 and 2001 Acts. ACC issued another decision in September 2003, in which it abated $1,865.61, comprising accrued Australian holiday pay of NZ $1,405.60 and sick pay of NZ $460.01 received on termination of Ms Hollis Australian employment in July 2000, as income earned post incapacity. The abatement was allocated over the period from 2 December 2000 to 22 December 2000. In November 2012, Ms Hollis asked ACC to include the holiday pay received from IRD on termination of her New Zealand employment on 30 October 1988 in the calculation of her weekly earnings, so as to increase her weekly compensation payments. On 25 January 2013, ACC declined the request on the ground that the New Zealand holiday pay was accrued after the date of incapacity of

3 15 October 1996, and as such it was post incapacity earnings and could not be included in her weekly earnings assessment. On 5 February 2013, ACC refunded Ms Hollis $1,816.11. On 13 February 2013, ACC explained the payment and said it comprised the gross New Zealand holiday pay that it said had been abated for the period from 2 November 1998 to 22 November 1998, and the gross Australian holiday pay from 9 December 2000 to 22 December 2000, less tax and a small overpayment. Ms Hollis applied to review the decision dated 25 January 2013 and argued that as her accident had occurred in April 1992, her compensation should be assessed under the 1982 Act, which provided for the inclusion of holiday pay in the definition of earnings. The review was heard under Part 5 of the 2001 Act. The Reviewer held that as Ms Hollis was not incapacitated until 15 October 1996, the relevant law was s 40 of the 1992 Act, which states that compensation is based on 4 and 52 weeks prior to incapacity. The holiday pay was paid after this and therefore could not be taken into account. The Reviewer gave the right of appeal to the District Court, but Ms Hollis filed her notice of appeal in the Authority and sought a decision under the 1982 Act. Jurisdiction [5] Mr McBride s protest to jurisdiction was threefold. First, he submitted that the directions I made on 24 September 2013, in which, in line with the practice note issued on 12 March 2012, I refused ACC s request to hold a hearing on jurisdiction alone, amounted to an assumption of jurisdiction which the Authority did not possess. [6] Secondly, s 135 of the 1992 Act deemed Ms Hollis to be a person who had cover continued under the 1992 Act, and ss 137 to 139 did not apply to her because her first entitlement to compensation was from the date of her incapacity, which was 15 October 1996. [7] Thirdly, when ACC made its operative decision, the 2001 Act was in force and nothing in the 2001 Act confers any jurisdiction on the Authority to address weekly compensation payable from October 1996. The 1982 Act was repealed and the Legislature did not leave all 1982 Act compensation in place, only compensation in limited specific instances. The practice note and the directions of 24 September 2013 [8] The practice note was developed in consultation with ACC and followed the format and wording that was acceptable to both ACC and the Authority. It provides for a formal protest to jurisdiction within 28 days of ACC being served with the notice

4 of appeal. If ACC objects to jurisdiction within time, it must file detailed submissions at this point and after submissions from the appellant, the protest can either go to a preliminary hearing or be heard on the papers. If the Authority has no jurisdiction, the appeal will be transferred to the District Court. If a late protest is made, then it is to be heard as a preliminary matter at the substantive hearing. [9] Ms Hollis filed her notice of appeal on 20 June 2013 and filed her submissions on 6 August 2013. ACC did not protest jurisdiction in any formal sense, but raised it at the telephone conference on 24 September 2013 and sought a separate hearing on this sole issue. I have little patience with this approach when not only was the protest two months outside the agreed time period, but the appellant had relied on the lack of a protest to file substantive submissions and I therefore declined ACC s request and directed it to support its protest to jurisdiction in the submissions to be filed for the hearing. [10] I did not dismiss the protest and assume the jurisdiction to hear the appeal as Mr McBride has suggested. The mere fact of denying ACC s late request to hear its protest to jurisdiction as a stand-alone hearing, does not amount to an assumption of jurisdiction that the Authority does not have. I specifically directed ACC to file submissions to cover the Transitional Provisions of the 1992 Act and subsequent Acts, which are the only provisions that can provide the Authority with jurisdiction to hear appeals brought by appellants who have cover for their injury under the 1982 Act. [11] Regarding the Authority s jurisdiction to canvass the substantive appeal at the hearing, I do not think it is appropriate to make a decision on jurisdiction without considering the facts that either confer or deny jurisdiction. If the facts establish that the Authority is the correct appellate body, then the substantive appeal should be decided without the need for a second hearing. If they do not, then the substantive appeal should be transferred to the District Court. If an appeal is mounted, the facts the Authority relied upon are clear. The Transitional Provisions of the 1992 Act [12] Ms Hollis cannot rely upon Davis, as unlike Mr Davis, she was not in receipt of, nor entitled to receive earnings related compensation under the 1982 Act as at 1 July 1992. This automatically brings her under the 1992 Act by virtue of the following transitional provisions of the 1992 Act, which apply to the calculation of her compensation as a person with cover under the 1982 Act for the incapacitating injury: Section 135. Relationship of this Act to Former Acts Subsection (1) continues cover under the 1992 Act for Ms Hollis accepted injury under the 1992 Act, but all entitlements are still subject to the other Transitional Provisions in Part 8 of the Act. Section 138. Weekly Compensation (1) Where any person is, immediately before the 1 st day of July 1992, or would have been entitled to be in receipt of compensation calculated under any of the provisions of sections 59, 60,61,63,64 and 88 of the Accident Compensation Act 1982, that compensation shall continue to be payable or be paid as if it had been calculated under this Act.

5 (2) Notwithstanding subsection (1) of this section, adjustments to the calculations referred to in that subsection that are to be made other than pursuant to and Order in Council or regulations shall be made under the 1982 Act. (3) Where subsection (1) of this section does not apply because a person was not entitled, immediately before the 1 st day of July 1992 to be in receipt of compensation to which that subsection applies, the entitlement of that person to compensation for loss of earnings in respect of any period after that date shall be determined under this Act. [13] In light of the above provisions, I accept Mr McBride s submission that the date of Ms Hollis first incapacity precludes the application of the 1982 Act to the determination of the correct earnings to use for the purposes of calculating her weekly compensation. [14] As Ms Hollis pointed out at the hearing, this penalizes claimants who continue to work after suffering an injury that later proves to be more serious, but the legislative intention to exclude the application of the 1982 Act to the calculation of such person s compensation is clear, however unjust it may appear. The repeal of the 1982 Act [15] I agree with Mr McBride that Ms Hollis case must be distinguished from both Langhorne and Davis, but not for the reason that he suggested, being that the operative decision in the present case was made when the 2001 Act was in force. [16] The operative decisions in both those appeals were made when the 2001 Act was in force - Langhorne in 2007 and Davis in 2011. The distinguishing difference is that in both cases, the appellants were in receipt of, or entitled to receive, weekly compensation calculated under either the 1972 Act or the 1982 Act as at 1 July 1992 and thus their right to have their compensation calculated under those Acts respectively, was preserved by virtue of s 138 of the 1992 Act, s 428 of the 1998 Act and s 365 of the 2001 Act. [17] Regarding jurisdiction, this meant that the operative decision, though made when the 2001 Act was in force, was made under the 1972 and 1982 Acts as applied by the 2001 Act and came within s 391(1)(b) of the 2001 Act. Therefore, under subs. (1), Part 9 of the 1982 Act applied to any review or appeal and thus the Authority had the jurisdiction to determine the resulting appeals, not the District Court. [18] As noted above, Ms Hollis does not have a decision made under the 1982 Act as applied by the 2001 Act, but a decision made under the 1992 Act as applied by the 2001 Act and pursuant to subs (4), Part 5 of the 2001 Act applied and the Reviewer correctly gave Ms Hollis the right of appeal to the District Court. The merits [19] It is not strictly necessary to deal with the merits, however, I do think it is important to comment on Mr McBride s submission that Ms Hollis claim for the inclusion of holiday pay in the calculation of her earnings must fail, whichever Act applies. As Mr McBride submitted, the statutory benchmark was and still is, average

6 weekly earnings, and for clarity, those were stated to be inclusive of any holiday pay received in respect of the relevant weeks. Mr McBride extrapolated this to mean that holiday pay could not increase an employee s average weekly earnings under s 53(1) if they took the holiday pay on termination, instead of during the year it accrued. The holiday pay was not actual earnings, but rather some artificially notional earning, that did not reflect reality, and Mr McBride endorsed the notion that to include holiday pay was to artificially increase the 52 week earning year by the number of weeks the holiday pay amounted to. [20] That proposition does not accord with established law on point under the 1982 Act, and Ms Hollis was quite correct to look to Davis as authority for this. Pursuant to the definition of earnings as an employee in s 52(2), and the operation of s 54(1) and subs. (2)(a) which make express provision for the inclusion of holiday pay for the purposes of ss 53 and 59, Judge Beattie included holiday pay in the sum he fixed as Mr Davis average weekly earnings at the date of incapacity. Although Judge Beattie did not specifically refer to s 54 in his decision, this section formed the basis of the related submissions and the calculations which he accepted as giving the correct result in terms of assessing Mr Davis relevant earnings under s 53(1). Section 54 provides: 52 Calculation of earnings (1) For the purposes of this Act, unless the context otherwise requires, the expression earnings, in relation to any person, means all his earnings as an employee as determined in accordance with this section and all his earnings as a self-employed person as so determined. (2) For the purposes of this Act, the expression earnings as an employee includes (a) Any wages, salary, allowances (including allowances of any of the kinds referred to in section 72 of the Income Tax Act 1976), holiday pay, overtime pay, long-service leave pay, bonuses, gratuities, extra salary, commissions, directors' fees, honoraria, emoluments, or remuneration of any kind paid or payable (whether in cash or otherwise) to any person in respect of or in relation to the employment of that person as an employee, not being (i) A lump sum payment (other than accrued holiday pay or accrued long-service leave pay) made to any person by way of bonus, gratuity, or retiring allowance on the occasion of any termination of employment of that person as an employee for any reason; or (b) (ii) Any payment made to any person by way of superannuation, pension, or annuity whether in respect of the past employment of that person, or of any other person of whom that firstmentioned person is or has been the spouse or a child or a dependant; or (iii) Any commission, retainer, or other amount that is paid or payable (whether in cash or otherwise) to a person who is deemed to be an employee under subsection (2) or subsection (3) of section 2 of this Act, by any person who is deemed to be the employer of that person under those subsections: An amount equal to 80 percent of the total amount paid or payable (whether in cash or otherwise) to any person who is deemed to be an employee under subsection (2) of section 2 of this Act, by any person

7 who under that subsection is deemed to be the employer of that person: (c) An amount equal to 90 percent of any amount paid or payable (whether in cash or otherwise) to any person who is deemed to be an employee under subsection (3) of section 2 of this Act, by any person who under that subsection is deemed to be the employer of that person, but does not include (d) Any allowance paid or payable (not being an allowance paid or payable to a person who is deemed to be an employee under subsection (2) or subsection (3) of section 2 of this Act by a person who is deemed to be an employer of that first-mentioned person) to the extent to which that allowance is, pursuant to a determination made by the Commissioner of Inland Revenue under section 73 of the Income Tax Act 1976 exempt from income tax; or (e) Any allowance of the kind referred to in section 69 of the Income Tax Act 1976; or (f) Any amount which is paid or payable by an employer, being or purporting to be remuneration for services rendered by an employee and allocated to a person or persons other than that employee in accordance with section 97 of the Income Tax Act 1976; or (g) Any amount (not being an amount which under section 55 of this Act is deemed to be a dividend) which under section 190 of the Income Tax Act 1976 is deemed to be a dividend paid by a company to any person and deemed to be received by that person as a shareholder of the company; or (h) Any amount which, under section 55 of this Act, is deemed to be a dividend received by a person from a company for which he provides services and in which he is a shareholder; or (i) Where subsection (4) of section 2 of this Act applies, any fees, allowances, bonuses, gratuities, commissions, emoluments, or remuneration of any kind paid or payable (whether in cash or otherwise) by the company, in respect of the services of the director in his capacity as director, to a firm, body, or institution of which that director is a member or employee; or (j) Any amount derived by any person as an employee which would otherwise be taken into account in calculating earnings as an employee under this subsection, but which is derived from employment outside New Zealand and is derived otherwise than from employment by virtue of which that person has cover in respect of personal injury by accident outside New Zealand; or (k) Any payments of which no account shall be taken in accordance with section 56 of this Act; or (l) Any compensation, as defined in section 2(1) of this Act, or any compensation payable under the Workers' Compensation Act 1956; or (m) Any earnings in respect of which no levy is payable by reason of section 83(3) of this Act; or (n) Any payment made by an employer in respect of which he is reimbursed by the Corporation under section 59(6) of this Act, to the extent that the Corporation is, by reason of such reimbursement, relieved and discharged from liability to pay earnings related

8 compensation which otherwise would be payable by the Corporation to the employee. (3) For the purposes of this Act, the expression earnings as a self-employed person, in relation to a self-employed person, means so much of the assessable income (as determined under and for the purposes of the Income Tax Act 1976) of that person as is beneficially derived by him from the carrying on by him of a business; but does not include income so derived to the extent to which that income consists of (a) Income from dividends (as defined in section 4 of the Income Tax Act 1976), not being income derived by that person from the carrying on by him of the business of dealing in shares; or (b) Income from interest or from any premium or like revenue arising from a debt, not being income derived by that person from the carrying on by him of the business of lending money or of a business in the course of the conduct of which financial accommodation is regularly given to customers; or (c) Income from rents, fines, premiums, or other revenues (including payment for or in respect of the goodwill of any business, or the benefit of any statutory licence or privilege) derived by that person as the owner of land from any lease of, or licence relating to, the land (including any chattels included in the lease or licence), not being income derived by that person from the carrying on by him of the business of (i) Operating any hotel, motel, motor camp, hostel, convalescent home, private hospital, or boarding house; or (ii) Hiring premises in conjunction with the provision of goods and services thereon where the hiring of the premises is for the sole or principal purpose of enabling the provision of those goods and services; or (d) Income from the lease or bailment of livestock; or (e) Income from the grant or renewal, or from the sale or other disposition, of any right relating to (i) The operation of any mine or quarry; or (ii) The extraction, removal, or other exploitation of any standing timber or of any natural resource; or (iii) The taking in any other manner of profits or produce from land; or (f) Income from any easement affecting land; or (g) Income from payments of any kind made as consideration for (i) The sale or other disposition of, or the use of, or the right to use, any copyright, patent, design or model, plan, secret formula or process, trade mark, or other like property or right; or (ii) The supply of scientific, technical, industrial, or commercial knowledge or information (but not including any services which are rendered as a means of enabling the application or enjoyment of such knowledge or information); or (h) Income derived by that person from a partnership or joint undertaking or other business arrangement where that person does not render personal services to a substantial degree in the carrying on of the business of the partnership or joint undertaking; or (i) Any share or interest in income derived by that person as a beneficiary under any will, trust, or settlement, not being a share or

9 interest referred to in subsection (4) of this section; or (j) Income which is neither derived from New Zealand (as defined in section 2 of the Income Tax Act 1976) nor deemed for the purposes of the Income Tax Act 1976 to be derived from New Zealand (as so defined); or (k) Any compensation as defined in section 2(1) of this Act; or (l) Any earnings referred to in subsection (2)(m) of this section: Provided that, for the purpose of assessing earnings for the payment of compensation, any income of a person allowed by any provision of the Income Tax Act 1976 to be spread back or apportioned to a financial year earlier than that in which the income was derived shall not be included in the earnings of that person for any financial year other than that in which it was derived, if the application to the Commissioner of Inland Revenue for the spread-back or apportionment was made subsequent to the time of the accident in respect of which earnings related compensation is or is to be claimed. (4) For the purposes of subsection (3) of this section, in the case of a person to whom paragraph (b) of the definition of the expression self-employed person in section 2(1) of this Act applies, any income referred to in that paragraph shall, to the extent of that person's vested beneficial share or interest in that income, be deemed to have been derived by him from the carrying on by him of a business. (5) Nothing in this section shall restrict section 30(6) of this Act. [21] The effect of s 54 is that provided the holiday pay at issue was received on account of work performed during the relevant period, rather than for an unrelated period, it was pro-rated over the relevant period to increase the actual amount of the person s earnings. The Holiday s Act 1981 was totally irrelevant to the calculation of earnings as an employee, as it should be, as the Holidays Acts provide for minimum paid holidays for employees; they do not provide any basis whatsoever for artificially limiting the express provisions of the 1982 Act under which holiday pay received on account of work in the relevant period is included in the statutory formula for assessing relevant earnings and paying compensation for loss of earning capacity. [22] Mr McBride referred me to Wild v ACC 2 and Sim v ACC 3, which he said were authority for holiday pay being excluded from earnings for the purpose of paying compensation under both the 1982 Act and the later legislation. Section 54 does not appear to have been re-enacted in the later legislation, so while these two cases may be relevant to the later legislation to allow for interpreting earnings as an employee by reference to the provisions of the Holidays Acts and the accruals rules under the Taxing Acts, they cannot be applied in any way to limit definition of earnings as an employee provided for in ss 52(2) and 54 of the 1982 Act. [23] It follows that Ms Hollis approach to the inclusion of holiday pay in the calculation of earnings as an employee under the 1982 Act is correct, but unfortunately, by virtue of the timing of her first incapacity, which both parties agreed was 16 October 1996, she is denied the benefit of this because of the strict application of s 138 of the 1992 Act and the Authority is therefore unable to entertain her appeal. 2 [2004] NZACC 371 (Judge Barber) 3 [2006] NZACC 62 (Judge Beattie)

10 Decision [24] The Authority does not have the jurisdiction to hear and determine the appeal. [25] The appeal is to be transferred to the District Court. [26] There is no order as to costs. DATED at WELLINGTON this 14 th day of January 2014. R Bedford