ACC Fails to Implement Will of Parliament
ACC Fails to Implement the Will of Parliament
A matter has come to my attention that I have a duty to inform the New Zealand public about. In my role as ACC advocate I have obtained information that raises serious concerns about the conduct of the Accident Compensation Corporation. Readers will be aware that scandal is nothing new to ACC but in nearly all instances the complex technical matters involved become too hard for the average person to understand. The Corporation simply rides out any unwanted attention and gets back to business when the dust has settled.
Over the last few years the Corporation has gone to significant effort to promote itself as being committed to fair and reasonable processes with a strong regard for the well-being of the injured. It is my solemn duty to inform the public that this commitment amounts to little more than impression management. Any commitment to reform was lost when Nikki Kaye was forced to step down as ACC Minister due to health issues and was replaced by Michael Woodhouse.
Now for the proof of my contention and unlike your average ACC related issue, this matter is relatively simple. The issues are as follows: ACC has failed to implement the will of Parliament. ACC has incorrectly assessed self-employed and self-employed shareholder employees for twelve years and ACC has no audit / reporting system in place to determine what part of the legislation self-employed earners have or have not been paid under.
In 2005 the Accident Compensation Act 2001 was amended. Clause 38 and Clause 39 of Schedule 1 were amended in that year. These Clauses determine how weekly compensation payments to the applicable classes of earner are calculated. The Clauses were amended in 2005 after the Courts determined the previous wording in those Clauses led to unjust outcomes.
ACC was required to change its policies and payment processes to reflect the amended legislation but it has not. This failure means that the injustices the legislature intended on resolving are not resolved. Simply put the Corporation has not implemented the will of Parliament. This failure amounts to a total disregard for Parliament, the Courts and the levy paying public. The Corporation has continued to perpetuate the injustices the Courts and Parliament intended to resolve in 2005.
ACC has not correctly assessed self-employed earners and shareholder employees for twelve years. Instead of following the legislative process, ACC introduced its own “process” and this process is not supported in the legislation and is in clear contrast with existing case law.
I have a document from ACC that I obtained under the Official Information Act. This document is dated the 9th of May 2017 and states the following:
"New self-employed and shareholder employees are those who, in the two completed income years prior to the incapacity had not been in employment of that type in either income year, but we're satisfied that they were an earner of that type at the date of incapacity. That is, their employment began in the income year in which the incapacity began so they hadn't yet passed a balance date, usually 31 March".
Simply put this means the that Corporation require 38 and 39 (2)(a) claimants to be in their first year of self-employment. That is the Corporation’s stated position on how it assesses weekly compensation for self-employed earners. The issue here is that the first year of self-employment requirement does not exist in the legislation. The specific type of earner that is affected are those self-employed who were in receipt of earnings in the same tax year as the suffered incapacity but had run at a loss in all previous financial years.
The wording in question is wholly identical in both Clauses and is as follows:
38 (2)(a) for claimants who first commenced receiving earnings as self-employed persons in the tax year in which the incapacity commenced, the amount calculated using the following formula:
39 (2)(a) for claimants who first commenced receiving earnings as a shareholder-employee in the tax year in which the incapacity commenced, the amount calculated using the following formula:
It is very clear that the wording that applies under the legislation can in no way be interpreted as a requirement for the self-employed earner to be in their first year of self-employment.
The “A” claimant is supposed to be covered under Clause 38 (2)(a) for self-employed earners and Clause 39 (2)(a) for shareholder employees. ACC has subverted the process in such a way that these “A” claimants have their claims treated as “C” claimants under 38 and 39 (2)(c). ACC then runs the weekly compensation formula by applying the “relevant year” consideration. This consideration does not apply to “A” claimants but does apply to “C” claimants. By applying the relevant year formula, the “A” claimant earnings are assessed on a year when the business ran at a loss.
The business must have run at a loss in all and any previous financial years to be eligible as an “A” claimant. By treating the “A” claimant as a “C” claimant the Corporation turns the requirement to be eligible for an “A” consideration into a certain liability for the ACC created “C” claimant.
For example, Claimant X starts a business. The business ran at a loss in year one. The business goes on to make money in year two and the claimant has received $100000 in earnings. The claimant is incapacitated in year two. Under the legislation the claimant should be entitled to 80 percent of $100000 under 38 (2)(a) but here is where the Corporation slides in its own process, the process unsupported by law, that the claimant must be in their first year of self-employment.
The Corporation provides a decision that states the claimant is a “C” claimant and in the “relevant year” they had zero earnings. The Corporation avoids the “A” consideration where they would have to pay out on $100000 by claiming the “A” claimant needs to be in their first year of self-employment which is blatantly incorrect.
Fortunately, people do not have to take my word on that. I am relying on the reasoning of the Corporation itself when it set out to defeat an appeal by the estate of a claimant called Michael Bartrom. I am also relying upon the rulings that flowed from the Bartrom appeals at the District Court and High Court level. These judgments are extremely informative.
Not only does this case law demonstrate that the Corporation’s position on the first year of self-employment is not tenable, it demonstrates how ACC attempted to turn an “A” claimant into a “C” claimant. They also demonstrate that the Corporation is very well aware of what it has been up to.
Bartrom Appeal Analysis
It is evident that in Bartrom at the District Court and later the High Court, that the Corporation successfully argued that Bartrom received earnings from ten years previously to defeat the appeals.
Bartrom v ACC District Court
 As I see the matter, the essential question which requires to be determined therefore is whether the deceased first commenced receiving earnings as a shareholder employee in the 2003 tax year. In the case of this deceased there is no dispute, even though it became evident fairly late in the piece, that the deceased did receive shareholder-employee earnings from ABCL in the 1993 and 1994 financial years, that situation being confirmed by the IRD in a letter dated 22 April 2008.
As the Corporation won both the Bartrom appeals based on the presence of earnings ten years previously it is simply not possible for the Corporation to reconcile its legally unsupported requirement that the claimant needs to be in their first year of self-employment with the arguments it presented in Bartrom.
The High Court Bartrom decision contains reasoning that demonstrates the anomaly beyond any doubt.
Bartrom v ACC High Court
Paragraph  states in part:
 Judge Beattie held that clause 39(2)(a) was not available to the appellant because the financial year ended 31 March 2003 was not the first financial year in which Mr Bartrom commenced receiving earnings as a shareholder-employee, as he had shareholder-employee earnings from ABCL in 1993 and 1994.
Paragraph  states in part:
 In my opinion, the difficulty with Ms Fisher’s approach is that it simply flies in the face of the plain words of clause 39(2)(a). Mr Bartrom had shareholder-employee earnings from ABCL in 1993 and 1994 and so he first commenced receiving earnings as a shareholder-employee of ABCL many years before the date of his incapacity.
Paragraph  states in part:
 Accordingly, even if the earnings in 1993 and 1994 are ignored, it cannot properly be said that Mr Bartrom first commenced receiving shareholder-employee earnings in the financial year ending 31 March 2003, because there were shareholder-employee earnings in the previous financial year.
The High Court is clearly factoring in previous financial years when applying the Clause 39 (2)(a) consideration. The Corporation’s first year in self-employment requirement demands that there are no previous financial years in the self-employed persons history. Simply put, it is not possible for the Corporation to reconcile its officially stated position with the detailed rulings provided by the Bartrom appeals.
That is not all. I have stated that ACC morphs “A” claimants into “C” claimants to avoid liability. As stated in paragraph  the earnings Bartrom received in 1993 and 1994 were evident fairly late in the piece. The arguments ACC relied upon before it discovered the 1993 and 1994 earnings are extremely significant.
Bartrom v ACC District Court
 The Corporation's first decision of 22 February 2006 determined that the deceased would only be entitled to weekly compensation at the full-time minimum rate, they determining that he had no earnings as a shareholder employee in the relevant year, namely to March 2002.
The bulleted point under paragraph  demonstrates the Corporation trying to make Bartrom a “C” claimant so it can apply the relevant year consideration. That consideration does not apply to “A” claimants.
Bartrom v ACC District Court
 To qualify under Clause 39(2)(a) it would require to be established that the deceased first commenced receiving earnings as a shareholder employee in the 2003 tax year. Indeed, that is the only qualification which is required to be established. It is the case that if that qualification cannot be met, then the formula contained in Clause 39(2)(c) applies. That qualification does not talk of the "relevant year", that requirement comes in only where the formula in (2)(b) or (2)(c) applies.
This evidence demonstrates important points. The amendment was in 2005 and it is clear that that the Corporation was morphing “A” claimants into “C” claimants as it attempted to do in Bartrom in 2006. The Corporation then discovered the earnings from ten years previously and changed its position to go down that line.
The Corporation argued the “relevant year” consideration but revoked its own decision when it realised its position was untenable under challenge. ACC argued this before it was aware of the previous earnings from 1993 and 1994. A big issue here is that even though ACC has been told by the Court that the relevant year consideration cannot be relied on by ACC, I have a 2016 decision letter on a 38 (2)(a) claim that does exactly that.
So even though the Corporation is aware that it cannot rely on the relevant year test, I have irrefutable proof it has continued to do so. It is also extremely pertinent that the decision maker who came up with the aforementioned 2016 decision was heavily involved in the Bartrom case.
Another telling point is that Corporation relied on the incorrect relevant year consideration and then later the previous earnings from 1993 and 1994 when arguing the Bartrom appeals. The Corporation imposed first year of self-employment requirement is never raised by ACC or the Courts. It is interesting that the Corporation had no trouble interpreting the legislation when it sought to defeat the Bartrom appeals.
Then there is the matter of the lack of audit to provide information on how many claimants were paid or declined payment under Clause 38 (2)(a).
ACC OIA Document
There were 5, 143 newly self-employed clients assessed for earnings related compensation between 1 July 2005 and 3 May 2017. We are unable to provide the percentage of claims that were accepted under clause 38(2)(a) as the data you have requested is at a level of specificity not held in ACC's reporting systems. We are therefore declining this part of your request, as the information does not exist or cannot be found. This decision complies with section 18(e) of the Act.
I believe that there is in fact an audit trail but that audit trail is configured to report on the basis of the Corporation’s unlawful process. Claimants are “newly self-employed” and “established self-employed” under the current auditing system. As the applicable Clauses contain three considerations being A, B and C it is not possible that there can be only two considerations.
This lack of an auditing process that actually reflects the requirements of the legislation as opposed to ACC’s “process” raises serious concerns on how accurately ACC has been reporting to the Minister as required under the Crown Entities Act. That is a matter for another article.
The Corporation’s current position is to refuse to engage on this matter. The Corporation has refused to state what legislation it is relying upon to support its position. The Corporation is refusing to provide any reasoning as to why its stated policy is in stark conflict with the Bartrom principles. The Minister has failed to state that he has confidence in ACC. The Minister simply states that ACC has confidence in its own position. I have raised these issues with the Ombudsman.
It is evident that thousands of claimants will have been impacted on by ACC’s unlawful process and people would have lost their homes and relationships after being denied their lawful entitlement. One of my demands is that ACC pays every single person it failed to pay. This of course will be very costly and to aggravate matters ACC will manually have to trawl through thousands of claims to determine who was not paid. This is due to the ACC acknowledged lack of a suitable auditing system.
It is very evident that ACC will not want to address these matters. There is more damaging and highly informative information to come and I will present that information in follow up articles. There is much the public needs to know.
Alex Taylor (Cassandra Shield)