Accident Rehabilitation and Insurance Corporation v Watton [2000] NZCA 265; (2000) 5 NZELC 96,045; [2001] NZAR 513 (10 April 2000)

Last Updated: 9 December 2011

IN THE COURT OF APPEAL OF NEW ZEALAND

CA277/99

	BETWEEN	ACCIDENT REHABILITATION AND COMPENSATION INSURANCE CORPORATION
		Appellant

	AND	MAUREEN WATTON
		Respondent

Hearing:	28 March 2000
Coram:	Richardson P Thomas J Blanchard J
Appearances:	I R Millard QC and A D Barnett for Appellant J M Miller for Respondent
Judgment:	10 April 2000

JUDGMENT OF THE COURT DELIVERED BY BLANCHARD J

[1] Transitional provisions are often troublesome for the drafters of legislation because a clear picture may not be available of exactly how a proposed change to a legislative scheme will affect existing arrangements, especially those made in reliance upon the law which is being changed. This appeal concerns the complex transitional provisions in the Accident Rehabilitation and Compensation Insurance Act 1992 (“the 1992 Act”) relating to persons with coverage under its predecessors the Accident Compensation Act 1972 (“the 1972 Act”) or the Accident Compensation Act 1982 (“the 1982 Act”). The 1992 Act has itself now been repealed and replaced by the Accident Insurance Act 1998 which in turn seems destined for further legislative reform, but the matters which are the subject of this judgment are not affected by the 1998 Act.
[2] It is worth noting this Court’s recent remarks in Hilder v Port Otago Ltd [1996] 1 NZLR 289 at 295, about the recognised objective of savings and transitional provisions:

Generally speaking, the function of savings provisions, where a substantive statute replaces another, is to preserve any rights, powers or privileges which may have accrued under the earlier enactment and which would or might otherwise cease to have effect. It is used to "save" what already exists. The function of transitional provisions, on the other hand, is to make special provision for the application of the new legislation to the circumstances which exist at the time the legislation comes into force. In other words, such provisions regulate and modify the provisions of the new statute during the period of transition. (See, e.g. GC Thornton, Legislative Drafting (2nd ed, 1979) at p 297.)

No hard and fast distinction between the two types of provision need be drawn, however, as the meaning of each tends to overlap in practice. Both generally evidence the legislature's desire to avoid the retrospective operation of legislation and ensure that the activities of citizens are governed by the law which is current at the time. The interests of persons with existing rights, powers and privileges are thereby protected. The New Zealand Parliament's endorsement of these principles is readily apparent in ss20 and 20A of the Acts Interpretation Act 1924.

[3] Since then the Acts Interpretation Act has been replaced by the Interpretation Act 1999 but s17 of the latter confirms the general rule that the repeal of an enactment does not affect an existing right or an existing status.
[4] The respondent, Mrs Watton, suffered a personal injury by accident to her wrist in October 1986. She was assessed under s60 of the 1982 Act as having a permanent incapacity. She was then less than 60 years of age. Accordingly under s66 of the 1982 Act her earnings related compensation payable under s60 was to cease on the date on which she would attain 65 years (6 October 1999). It is accepted that in reliance on her weekly compensation payments and upon this provision Mrs Watton arranged a mortgage which would be paid off by the time she was 65.
[5] As it will later be relevant it is convenient to mention at this point that there were provisions in s66 of the 1982 Act under which in certain circumstances compensation could be payable until the age of 70.
[6] As from 1 July 1992 the 1982 Act was repealed and replaced by the 1992 Act whose Long Title read:

An Act to establish an insurance-based scheme to rehabilitate and compensate in an equitable and financially affordable manner those persons who suffer personal injury

[7] One of the evident purposes of the new legislation was to cause accident compensation payments to cease when the recipient qualified for national superannuation. In 1986 Mrs Watton could have expected to receive national superannuation from the age of 60. At roughly the same time as it passed the new accident compensation legislation, Parliament provided in another enactment (the Social Welfare (Transitional Provisions) Amendment Act (No.2) 1991, in force from 1 April 1992) for the national superannuation qualifying age (NSQA) progressively to increase to 65, which it will do on 1 April 2001. The intention to align accident compensation cessation with NSQA appears to be the explanation for certain provisions in the 1992 Act although it has to be said that a neat fit was not entirely achieved for those in or approaching the 60-65 age bracket.
[8] Under the new superannuation provisions Mrs Watton reached NSQA at the age of 63½. This case is about whether she remained entitled to accident compensation payments for her permanent incapacity until the age of 65. It is a test case. We were told from the bar that it has now been established by the appellant Corporation that there are about 270 other people who were permanently incapacitated before 1 July 1992 and are by reason of their ages in a similar position.
[9] For those suffering personal injury (as defined) after the commencement of the 1992 Act s52(1) (as substituted in 1993) provided:

52. Age limits-

(1) Except as provided in this section, a person who has attained the national superannuation qualification age shall not be entitled to any compensation for loss of earnings or loss of potential earning capacity under this Act.

[10] Special provisions were made in subs(2) and (3) for those first becoming entitled to compensation for loss of earnings shortly before or after attaining NSQA.
[11] The transitional provisions which are applicable to Mrs Watton are found in Part VIII. They are given or described here as they appeared after amendments in 1993 and 1996. Section 135(1) said that any person who had had a claim accepted for personal injury by accident within the meaning of the 1972 Act or the 1982 Act suffered before 1 July 1992 “shall be deemed to have suffered personal injury that is covered by this Act”. Where a claim by such a person for an accident suffered before 1 July 1992 was lodged before 1 October 1992 the “acceptability of the claim” was to be determined under the 1982 Act as if it had not been repealed (s135(3)) and “the continued entitlement” of the person to, inter alia, compensation was to be determined under the appropriate former Act “but subject to this Part of this Act”(subs(4)).
[12] Section 138 provided:

138. Weekly compensation-

(1) Where any person is, immediately before the 1st day of July 1992, in receipt of or would have been entitled to be in receipt of compensation calculated under any of the provisions of sections 113, 114, 116, 117, and 118 of the Accident Compensation Act 1972 or of sections 59, 60, 61, 62, 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; and the personal injury by accident suffered by that person shall be deemed to be personal injury within the meaning of this Act.

(1A) Nothing in subsection (1) of this section shall apply in respect of any assessment of compensation under section 114 of the Accident Compensation Act 1972 or section 60 of the Accident Compensation Act 1982 unless the assessment had been completed before the 1st day of October 1992 or a decision in respect of any such assessment was subject to an application for review under Part IX of the Accident Compensation Act 1982 that was lodged before the 1st day of October 1992.

(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 an Order in Council or regulations shall be made under the Accident Compensation Act 1972 or the Accident Compensation Act 1982, as appropriate.

(3) Where subsection (1) of this section does not apply because a person was not entitled, immediately before the 1st 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 or loss of potential earning capacity in respect of any period after that date shall be determined under this Act.

[13] Section 59 of the 1982 Act dealt with compensation for temporary loss of earning capacity and, as we have seen, s60 with permanent incapacity. (The equivalent provisions in the 1972 Act were ss113 and 114.)
[14] Section 139 of the 1992 Act provided:

139. Cessation of compensation-

The continued eligibility of any person to receive compensation continued by virtue of section 138 of this Act shall be determined in accordance with this Act, except that section 51 of this Act does not apply if the Corporation is satisfied that the determination is unlikely to find that the person has a capacity for work.

[15] If s139 had applied to Mrs Watton’s situation it would have been perfectly clear that her compensation payments would cease when she reached NSQA. But s141(1) provided that nothing in s139 was to apply to payments calculated under s114 of the 1972 Act or s60 of the 1982 Act.
[16] In s141(2) there was a power for the Corporation to reassess compensation payments under the former Acts if not satisfied that they were an accurate reflection of earning capacity.
[17] Section 142 provided:

142. Cessation of earnings related compensation on account of age-

(1) Subject to this section, where any person is receiving payments by virtue of section 138 of this Act, that compensation shall not cease to be payable, on account of age, until the close of the 30th day of June 1997, or at the age at which it would have ceased to be payable under the Accident Compensation Act 1972 or the Accident Compensation Act 1982, whichever first occurs.

(2) No compensation shall be payable under this section to any person-

(a) After the 30th day of June 1994, where the person attains the national superannuation qualification age before the 1st day of July 1993, unless that person has made an election not to receive national superannuation in respect of any period commencing after the 30th day of June 1994; or

(b) Where that person attains the national superannuation qualification age on or after the 1st day of July 1993, unless that person has made an election not to receive national superannuation in respect of any period commencing after the expiry of 12 months from the date of attaining the national superannuation qualification age.

(3) Any election under subsection (2) of this section must be made-

(a) Before the 1st day of October 1993; or

(b) Within 13 months after the commencement of the incapacity in respect of which the compensation is payable; or

(c) At any time not later than 1 month before the attainment by the person of the national superannuation qualification age,-

whichever last occurs.

(4) Any election under subsection (2) of this section may be exercised or reversed outside the period specified in subsection (3) of this section only if the Corporation is satisfied that the circumstances of the person have changed significantly since the expiry of that period.

(5) Nothing in subsection (2) of this section shall entitle any person to compensation under this section in respect of any period for which that person is not otherwise entitled by virtue of this Act.

[18] Finally, there were two transitional provisions dealing with compensation payable to spouses and dependants of persons accidentally killed before 1 July 1992 where compensation was being paid under ss65 and 88 of the 1982 Act or s123 of the 1972 Act. For present purposes it is enough to say that these sections gave compensation rights to spouses and other dependants. Section 145(1) of the 1992 Act provided for such compensation to continue as if calculated under the 1992 Act. Section 145(2) made specific provision for cessation of that compensation taking into account the age or remarriage of the spouse and the age of children. It is clear from s146, however, that the cut-off points provided for in s66 of the 1982 Act and mentioned in paras [4] and [5] above were still to be relevant:

146. Cessation of earnings related compensation to surviving spouse on account of age-

Notwithstanding section 145 of this Act, no payment shall be made to a surviving spouse who has attained an age greater than the age at which that person would cease to be entitled to that payment by virtue of section 66 (2) of the Accident Compensation Act 1982.

[19] In the District Court Judge Beattie found that the Corporation had been correct to rule that Mrs Watton’s compensation entitlements ceased on her attaining the NSQA. He treated s138(1) as the source of her entitlement but said that the provisions of s142 were not applicable. He saw them as a “specific amelioration” of the “harsh consequence” of the repeal of s66 of the 1982 Act. But it was only intended to apply to recipients who were approaching NSQA at the time of the repeal of the 1982 Act. He took the view that by implication the legislature considered that those persons who were the recipients of weekly compensation under the 1982 Act, but were outside that particular age band, were in a position, if properly informed at the time of repeal, to order their affairs and to take account of the new cessation date for them which was provided, he said, by s52 of the 1992 Act.
[20] This decision was reversed on appeal by a Full Court of the High Court (Gallen and Hammond JJ). They said that while s52 indicated the intention of Parliament with regard to the cut-off point, that section did not apply to the circumstances of the case which fell to be determined on the transitional provisions. Section 138 was subject to the whole Part of the Act, which included s142. Read literally, they said, s142 would require compensation payments to Mrs Watton to cease on 30 June 1997, the first of the three dates mentioned. A literal interpretation of the section would not only give rise to major anomalies which a perusal of the Act as a whole made clear Parliament could not have intended, but it would also have been contrary to the intention of Parliament as expressed in s52. It would also have given a shorter period of entitlement for the incapacitated person than a surviving spouse would enjoy. The High Court said it was extremely unlikely that Parliament would have had such a distinction in mind.
[21] After considering various possibilities the Judges said that it was impossible to find any construction which did not involve anomalies. To interpret the provisions of the Act in the way in which the Corporation had done was to impose a particular disadvantage on a comparatively limited number of people. That would create an injustice which Parliament could not possibly have intended. In the High Court’s view, and bearing in mind particularly the fact that a surviving spouse was entitled to payments until the age of 65, and that in due course all persons would be entitled until that age, the transitional provisions were to be interpreted by regarding the “unexplained date” in s142 (30 June 1997) as having no application to the case. The appeal was accordingly allowed and the Corporation now appeals to this Court.
[22] The Court has been much assisted by the excellence of the written and oral submissions from counsel. For the Corporation, Mr Millard QC argued that under s135(1) Mrs Watton had cover of the type available under the 1992 Act with both additional features and more restrictive features, including the age restriction in s52(1). Under s138(1) compensation was to be calculated under the 1992 Act. That also indicated that she would be affected by the cut-off imposed under that Act. Counsel said that the fact that the age restriction applied was made clear by s142, although it was an ameliorating provision, not the source of the restriction. The use therein of the expression “cease to be payable, on account of age” was said to be a clear echo of s52. Subsection (2) also made it plain that compensation was to cease at NSQA unless s142(1) applied and an election was made not to receive national superannuation. That provision would not make sense if the age restriction in s66 of the 1982 Act continued to apply. Section 142 would be left without any function. The significance of 30 June 1997 was that it marked the expiry of five years from the commencement of the 1992 Act, which must have been considered a reasonable period for affected persons to re-order their affairs.
[23] Mr Millard submitted that s139 was concerned with recovery of capacity rather than with any age limit. Hence it had no relevance to persons classified as suffering permanent incapacity. That was why s141 excluded the operation of s139 in relation to payments under s60 of the 1982 Act. They could however be reassessed under s141(2). So s60 was “not inviolate”. Mr Millard noted that s139 was amended in 1996 along with s49 which dealt with cessation of weekly compensation when a person had capacity for work, i.e cases which under the 1982 Act fell within s59.
[24] There was, counsel said, no logic in imposing an earlier cessation on those coming within s59 than on those within s60. Their incapacity, though classified as temporary, might well in reality be permanent. The 1992 Act did not make any such distinction and, under s135(3), the ability for someone injured prior to 1 July 1992 to complete the assessment process for conversion from s59 status to s60 status ceased on 1 October 1992. That was a period likely to be inadequate in many circumstances.
[25] For the respondent, Mr Miller emphasised the vulnerable position of his client and the others affected by this appeal. They had been given a status by the 1982 Act which assured them of compensation payments for their permanent incapacity until aged 65. Mrs Watton had planned her affairs accordingly. For Parliament to take away an existing right of this kind required an abundantly clear provision, otherwise the general rule in the Interpretation Act mentioned above was to govern the situation. There was no such clear statement. Parliament should not therefore be taken to have intended such an injustice to a small group.
[26] Mr Miller submitted that the 1982 Act established three categories of claimant: (a) dependants of those fatally injured; (b) s60 claimants with permanent incapacity; and (c), much the largest group, those coming within s59 who were suffering from a temporary incapacity. Counsel said that each of these groups was dealt with separately in the transitional provisions. The age limit applied only to the s59 claimants. The dependants had their own provisions, namely s145 and 146. Section 139 applied the age limit in s52 to s59 claimants. It was not, however, applied to s60 claimants (s141(1)). There was no provision anywhere applying the age limit to s60 claimants. Section 142 was merely an ameliorating provision, not a source of an age limit. There appeared to have been a legislative slip: it must have been intended that s142, which certainly applied to s59 claimants, was to apply to them only. It should be read as if it began:

(1) Subject to this section, where any person is receiving payments under s113 of the Accident Compensation Act 1972 or s59 of the Accident Compensation Act 1982 by virtue of s138 of this Act...

[27] Such a reading would prevent the anomaly that otherwise dependants of those killed before 1 July 1992 would continue to receive payments, in some cases, to age 65 or even beyond, but those permanently incapacitated before that date would not.
[28] It must be taken, Mr Miller said, that there was no need to make special provision for s60 claimants because they were recognised by Parliament as having vested rights up to age 65.
[29] We find these arguments evenly balanced but, not without some hesitation, have concluded that Mr Miller is right and that it is unlikely that Parliament would have wanted to strip a small but vulnerable group of their vested entitlement on the basis of which they were very likely to have planned their future financial arrangements. These were not able-bodied people who, with the benefit of some lead time, had a prospect of re-establishing themselves so far as employment was concerned. A different view could be taken of s59 claimants who were not classified as permanently incapacitated, although we appreciate the force of Mr Millard’s submission on this point.
[30] Any anomaly as between s59 and s60 claimants is, however, matched by that which would exist between dependants (under ss145 and 146) and s60 claimants if the Corporation’s argument were to succeed.
[31] We do not accept Mr Millard’s submission that ss135 and 138 imposed on those injured prior to 1 July 1992 all the limitations found in the 1992 Act. The function of s135 was to ensure that they were still covered for their personal injury notwithstanding the changes to the relevant definition in the 1992 Act. Compensation was to continue under the former Acts. A s60 claimant was “deemed” to have suffered an injury covered by the 1992 Act. Section 138 was concerned with “calculation” of payments which did not encompass entitlement or cessation. The payments were to be made under the former Acts but calculated “as if” under the 1992 Acts. Section 141(1) made this clear when it spoke of payments calculated under the former Acts. Section 141(2) referred to “payments under” those former Acts. And s138(2) required adjustments to the calculations to be made “under” the former Acts. (Compare, however, s140 which evidences the inconsistency in the drafting (“payments made under s138”) and, for a third variant, s142(1) (“payments by virtue of s138”)).
[32] It was, we think, necessary if the s52 age limit was to apply to a class of claimants and to payments made to them under a former Act, continued by virtue of s138, that a transitional provision should directly and unambiguously invoke it or should impose a specific alteration to the position of that class. Sections 145 and 146 did the latter. Accordingly, s52 was to have no application to dependants. In contrast, s139 expressly applied s52 to s59 claimants by saying that their continued “eligibility” (a word perhaps thought more apt for a temporary situation than “entitlement”) was to be determined in accordance with the Act. (We do not accept that s139 was couched in terms suggesting that it was relevant only to recovery of capacity to work.) But s139 expressly did not apply to s60 claimants (s141(1)). It follows that it is necessary to look elsewhere in the transitional provisions. But nothing is to be found. It is common ground that s142 is simply an ameliorating provision where an age limit is found elsewhere. It is not a source of any age limit. As no age limit can be found in the transitional provisions for s60 claimants, s142 cannot apply to them and is to be read as functioning only in respect of s59 claimants.
[33] In our view this reading makes some sense of the transitional provisions as a whole and minimises the hardship which would otherwise fall on the relatively small group represented by Mrs Watton. It can be said that this conclusion enables them to have both accident compensation payments and national superannuation, and is therefore contrary to one of the policies of the 1992 Act. But it was a temporary exception only and one which was to be expected where Parliament was dealing with people who already, before 1 July 1992, were suffering from an injury which permanently incapacitated them. We repeat that if Parliament had actually wanted to take away the vested right of such persons to receive compensation until age 65 it could be expected to have done so directly and unambiguously.
[34] In terms of the Long Title to the 1992 Act it would not be “equitable” to remove the vested rights of the appellant and others in her group. Their relatively small number and the limited period for which their compensation would continue after NSQA must have been seen as “financially affordable”.
[35] The appeal is dismissed with costs of $5,000 to the respondent together with her reasonable disbursements on the appeal, to be fixed if necessary by the Registrar.

Solicitors
Broadmore Barnett, Wellington for Appellant
John M Miller, Wellington for Respondent