EM v Accident Compensation Corporation [2015] NZHC 971 (8 May 2015)

Last Updated: 26 May 2015

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV 2014-404-002436 [2015] NZHC 971

BETWEEN	EM Plaintiff/Respondent
AND	ACCIDENT COMPENSATION CORPORATION Defendant/Applicant

Hearing:	4 May 2015
Appearances:	A Hooker for the Plaintiff/Respondent C Hlavac and A Keir for the Defendant/Applicant
Judgment:	8 May 2015

_{JUDGMENT OF ASSOCIATE JUDGE CHRISTIANSEN}

This judgment was delivered by me on

08.05.15 at 4:30pm, pursuant to

Rule 11.5 of the High Court Rules.

Registrar/Deputy Registrar

_{Date...............}

EM v ACCIDENT COMPENSATION CORPORATION [2015] NZHC 971 [8 May 2015]

Background

[1] The defendant Accident Compensation Corporation (ACC) applies to strike out the plaintiff’s claim of losses she says she has incurred because of the way ACC dealt with her son’s claim.

[2] In 1993 ACC accepted a claim by the plaintiff ’s son for compensation as a

result of post-traumatic stress disorder.

[3] The plaintiff says despite requests for assistance, from May 1995 until December 2008 ACC repeatedly refused to approve or pay for more than 13 hours of attendant care for her son. Because of this the plaintiff says she was forced to provide that attendant care without compensation and that she suffered significant financial consequences as a result.

[4] In December 2008 a review and decision required ACC to increase attendant care payments and to refund previous short payments.

[5] The plaintiff’s claim is for negligence. She pleads she was a person who it was foreseeable would suffer harm if ACC failed to comply with its obligations. It is pleaded ACC owed the plaintiff a duty of care to:

(a) Provide entitlements in accordance with the provisions of the Accident Compensation Act 2001 (the Act) in respect of her son who had cover under that Act.

(b) Ensure that her son received all the entitlements he was entitled to receive.

(c) Correctly and fully perform its obligations in relation to the provision for and funding of attendant care for her son.

[6] The claim is an unusual one. It is a claim brought by someone other than whom ACC accepted a responsibility to make payments for. Someone ACC had no statutory obligations to.

[7] The plaintiff accepts no statutory duty was owed to her, rather that in the circumstances whereby it is claimed, the statutory obligations owed to her son were not maintained; that ACC was negligent to her the care attendant of her son in circumstances where it was reasonably foreseeable the economic consequences would likely cause a cost to her.

[8] The plaintiff said her relationship with ACC arises at common law because she is a person that ACC knew about who would suffer harm if ACC did not do what it was meant to do. It is her case that ACC knew, as a result of her repeated requests, that she needed support and therefore ACC assumed responsibility.

[9] A single cause of action in negligence is pleaded in support of the plaintiff’s

claim.

Application for strike out

[10] In issue for consideration is whether or not the plaintiff has a claim capable of succeeding and if not then it should be struck out. If so, then likely it would be because some further factual enquiry into the circumstances of the claim may be needed and for that reason a trial enquiry is appropriate.

[11] Rule 15.1 of the High Court Rules provides:

15.1 Dismissing or staying all or part of proceeding

(1) The court may strike out all or part of a pleading if it–

(a) discloses no reasonably arguable cause of action, defence, or case appropriate to the nature of the pleading; or

(b) is likely to cause prejudice or delay; or

(c) is frivolous or vexatious; or

(d) is otherwise an abuse of process of the court.

...

[12] The leading case addressing the principles to apply in an application to strike out a claim is now Couch v AG¹, per the minority decision of Elias CJ and Anderson J. Those principles can be summarised as follows:

(a) Pleaded facts are assumed to be true, although pleaded allegations which are speculative and without foundation are not.

(b) The cause of action or defence must be clearly untenable.

(c) It is inappropriate to strike out a claim summarily unless the Court can be certain that it cannot succeed.

(d) The jurisdiction is to be exercised sparingly and only in clear cases.

(e) The jurisdiction is not excluded by the need to decide difficult questions of law requiring extensive argument.

(f) The Court will be slow to strike out a claim in a developing area of law and particular care is required in areas where the law is confusing or developing.

[13] The Court will strike out a claim if, as pleaded, it is so clearly untenable that the plaintiff cannot possibly succeed but if disputed questions of fact arise, the case should go to trial.²

ACC’s case for strike out

[14] ACC’s case does not turn on issues of fact. Its focus is upon applications of principles of law relating to:

_{(a) The operation of the statute bar at s 317 of the Act.}

¹ _{[2008] NZSC 45.}

² Attorney-General v Equiticorp Industries Group Limited [1996] 1 NZLR 528 (CA) at 533.

(b) Whether, as a matter of law, ACC owes a duty of care to the plaintiff, being a third party taking care of the claimant.

(c) Whether, as a matter of law, ACC owes a duty of care to prevent economic loss being caused to the plaintiff.

[15] For ACC it is submitted that there is no reasonably arguable cause of action.

The plaintiff ’s case in opposition

[16] It is the plaintiff ’s case that her claim is not for breach of statutory duty. She

accepts ACC owed no statutory duty to her. Hers is a claim in negligence.

[17] For the plaintiff it is asserted she is not a claimant from, and nor does she have any relationship with ACC; rather she is the mother of the claimant and her relationship with ACC arises at common law because she is a person that ACC knew about who would suffer harm if ACC did not do what it was meant to do.

[18] The plaintiff’s case is that ACC knew, as a result of her repeated requests, that she needed support, and therefore assumed responsibility and that is the basis for her claim of a duty of care.

Considerations

[19] ACC says the plaintiff’s claim is statute barred by s 317 of the Act. To the extent the plaintiff’s claim alleges negligence by ACC it is submitted on behalf of ACC that the claim is, in practical terms, actually for a breach of statutory duty.

[20] Issues include whether ACC owes a duty of care to the plaintiff and whether that duty includes preventing economic loss to the plaintiff.

[21] This judgment will address the respective arguments of counsel on these matters.

Statute bar

[22] Section 317 provides:

317 Proceedings for personal injury

(1) No person may bring proceedings independently of this Act, whether under any rule of law or any enactment, in any court in New Zealand, for damages arising directly or indirectly out of–

(a) personal injury covered by this Act; or

(b) personal injury covered by the former Acts.

[23] If an injury is covered by the ACC regime the bar applies and if not then common law action is preserved.

[24] It is ACC’s position that the plaintiff’s claim arises indirectly from the personal injury suffered by her son. For the plaintiff it is argued that that analysis is an over-simplification.

Duty of care

[25] The views of counsel are expressed by reference to their consideration of case authority.

[26] In Queenstown Lakes District Council v Palmer³ the Court of Appeal noted:

Essentially, the Accident Compensation Legislation in both its original and amended forms denied those persons covered under the Act access to the Courts at common law in return for the perceived advantages of the statutory scheme. The legislation reflected this policy from the outset. The exchange has frequently been spoken of as a social contract or social compact.

[27] In that case Mr Palmer suffered mental injuries from witnessing his wife’s death from drowning in a river-rafting accident. His claim included exemplary damages. The Court of Appeal held his claim was not barred because it did not arise directly out of his wife’s death but related to a personal injury suffered by Mr Palmer

_{as a “secondary victim”.}

³ [1998] NZCA 190; [1999] 1 NZLR 549 at 555.

[28] The injuries for which Mr Palmer sought damages were the mental injuries he himself suffered as a result of the alleged breach of duty of care owed to him. The Court of Appeal held that it would have been unjust that a person who suffers mental injury witnessing a personal injury or death of another would not be entitled to either compensation under the Act or damages of common law.

[29] In Chalecki v ARCIC⁴ the High Court considered an appeal against the decision of the District Court striking out Mr Chalecki’s claim. The claim alleged that due to pressure by ACC he was required to return to work causing him personal injury separate to that for which he had cover for. Mr Chalecki claimed he suffered economic losses as a result.

[30] Justice John Hansen held:

It seems to me that s 14 is a complete bar to these proceedings. On any assessment of the pleadings, it is clear that the damages sought by Mr Chalecki arise directly, or indirectly from his original personal injury. If he had not been personally injured, he would not have come within the aegis of ACC or the relevant statutory provisions. The alleged damages arise from efforts made by ACC to rehabilitate Mr Chalecki within the terms of the Act. The loss alleged must, therefore, arise directly, or indirectly, from a personal injury covered by the Act.

[31] As earlier noted the plaintiff denies she seeks to impose a new category of duty. The plaintiff says as the Naysmith⁵ authority confirms, the concept of ACC owing a duty of care to family members of a claimant is not a novel duty of care.

[32] In Naysmith the Court did not strike out the plaintiff’s negligence claim noting that based on the facts pleaded the losses would not have occurred had ACC not given and then breached its undertaking to the family member claimant.

[33] In Naysmith the Court held that it was arguable that the legislative policy of the legislation excluded claims for personal injury by accident but did not touch a claim for injury caused not by the accident but by the negligent breach of an

_{assumed obligation.}

⁴ _{(AP 28/01) H.C. Greymouth, John Hansen J, 10 October 2011.}

⁵ Naysmith v ACC [2006] 1 NZLR 40.

[34] The plaintiff ’s case here is that a trial would permit an inquiry to determine whether ACC’s failure to pay for sufficient attendant care (until a review decision determined the extent of care required) was a negligent breach of duty.

Pure economic loss

[35] ACC says the plaintiff’s claim is for pure economic loss relating to lost income and losses involved in the sale of her property. Mr Hlavac submits that the extent to which a person can be liable for pure financial loss is itself also another area of controversy. Mr Hlavac submits it is a matter of assessing the remoteness of the loss and ordinary principles of causation claims of economic loss suffered by a caregiver and is without precedent in New Zealand law.

[36] Mr Hooker submits any consideration of reasons for and against the imposition of a duty in the particular circumstances should be decided in the factual setting; that the Court should hear evidence about the matters pleaded before deciding whether in all the circumstances a duty applies.

[37] Mr Hooker submits it is clearly established that if the defendant has or is deemed to have assumed responsibility to the plaintiff to be careful in what is said or written, thereby creating proximity, it would usually, subject to policy considerations, be fair, just and reasonable to hold the defendant liable for want of care. ⁶

[38] At paragraph 26 of the judgment the Court stated:

In most cases, however, there will be no voluntary assumption of responsibility. The Court will, however, deem the defendant to have assumed responsibility and find proximity accordingly if, when making the statement in question, the defendant foresees or ought to foresee that the plaintiff will reasonably place reliance on what is said.

[39] This case, Mr Hooker submits, is about a situation where the plaintiff repeatedly made enquiry of ACC for help; that the plaintiff did not know that she

_{was asking for “attendant care” but ACC’s repeated statements that there was no help}

⁶ A J v Carter (2003) CA 72/02 at paras 24 – 26.

available provides evidence of a situation where a reasonable person in the plaintiff’s

position would rely upon that advice given.

[40] Mr Hooker submits the Court needs to find out exactly what was said by ACC and what exactly was asked by the plaintiff, before deciding whether the circumstances imposed a duty of care.

Overview of considerations

[41] It is ACC’s case that the plaintiff’s claim be struck out in its entirety because there is no reasonably arguable cause of action because s 317 of the Act bars the claim but that even if it was not statute barred ACC owes no duty of care and there is no basis for imposing such in this case, and there is no basis for creating an exception in finding a duty to prevent pure economic loss as claimed.

[42] The plaintiff ’s position is that she relied on ACC’s representations and in such circumstances the Courts have ruled ACC has a duty of care. Also, as ACC knew there was clearly a relationship between the plaintiff and ACC. The plaintiff submits therefore a duty of care exists but at the very least the matter needs to go to a trial so that the evidence around statements and assumption can be explored.

[43] Mr Hooker rejects claims the proceedings are barred because it arises out of the conduct of ACC; and the Courts have already accepted a duty of care can arise in such circumstances.

Discussion

Statute Bar

[44] In this proceeding it is the case for the plaintiff that the harm suffered by her had no connection to the injuries suffered by her son; that the harm was caused by the actions of ACC and occurred as a result of entirely separate events which happened some time after the personal injury suffered by her son.

[45] Mr Hooker submits it is clear that the alleged harm suffered by the plaintiff is completely unrelated to that for which ACC was addressing in its obligations to her son; that the plaintiff’s position is more aligned to the Naysmith situation where the plaintiff was not a claimant but a family member who alleged harm caused by ACC’s actions or inactions.

[46] It is submitted for the plaintiff that Naysmith is authority for a claim that a member of a family who suffers loss as a result of a breach of duty of care by ACC when handling the person’s family claim, is covered. In that case the court upheld the right of the Naysmith family to pursue its common law claim for negligence. The Court confirmed that whilst the Act excluded claims for personal injury by accident it did not affect a claim for injury caused not by the accident but by negligent breach of an assumed obligation – as the court held had occurred when an ACC officer assured Mr Naysmith’s wife that ACC would look after her husband but that in the circumstances of the case it did not do this appropriately.

[47] Mr Hooker submits that both the Queensland Lakes and Naysmith cases are authorities for the proposition that a right of action will exist where the harm suffered by the plaintiff does not directly arise from personal injury and that harm suffered in circumstances which are totally separate from the personal injury shall provide recourse to a remedy.

Duty of Care

[48] In the Court’s view there are differences between the Naysmith case and this one. There is not here, as there was there a representation about what would be provided by way of cover under the Act. In this case there was no representation that anything else would be provided outside of ACC’s statutory obligations. In Naysmith there was a separate indication that other treatment and costs would be provided and paid for.

[49] This case is about whether a duty of care can be owed in the circumstances to a person other than he for whom the payment was intended to benefit. At its core this case is about claims of a failure to carry out a statutory obligation to assess and

pay attendant care. It is not just about the foreseeability of harm occurring to someone other than the party to whom and on whose behalf the payment is made. This Court thinks that it is also about whether there should be an additional duty imposed when parliament has not seen fit to offer a remedy.

[50] In Couch the Supreme Court considered whether the probation service could owe a duty of care to the plaintiff who was injured when a parolee with whom she worked violently assaulted her during a robbery. The Court’s focus was upon a claim for exemplary damages. The Court noted it would always be cautious about imposing a new duty in cases of omission. In the particular circumstances of that case the Court majority held it was possible to frame a duty not to the public at large but to those at “particular risk”. The Court said that if proximity could be established then the next consideration is whether the policy reasons mitigated against the imposition of a duty.

[51] In this case the Court agrees that Couch confirms that a public body may owe a duty to certain people at ‘particular risk’ of foreseeable harm, but that does not assist the plaintiff because the question of duties owed by ACC has already been considered and the relevant decisions already reject the imposition of such duties against ACC.

[52] In Pearce v ACC⁷ Penlington J considered whether to strike out a statement of claim seeking exemplary damages for negligence and breach of statutory duty. The learned Judge considered the decision of the English Court of Appeal in Jones v Department of Employment⁸ in which case the plaintiff’s claim for an unemployment benefit had been disallowed by an adjudication officer, then was upheld after further evidence had been provided, but then was overturned on appeal. In that case the plaintiff then commenced a common law action against the department alleging the adjudication officer had been negligent in disallowing the claim for the benefit.

_{[53] The UK Court of Appeal said:}

⁷ _{(1991) 5 PRNZ 297 (Penlington J).}

⁸ [1988] All ER 725, at 734 - 736.

The present action, if it were to proceed, would necessarily involve a challenge to the correctness of the adjudication officer’s decision. That would be a challenge to its finality by a route other then provided by the statutory provisions themselves.

...

The question thus is whether taking all the circumstances into account it is just and reasonable that the adjudication officer should be under a duty of care of common law to the claimant to benefit. Having regard to the non- judicial nature of the adjudication officer’s responsibilities, and in particular to the fact that statutory framework provides a right of appeal which, if a point of law arises can eventually bring the matter to this Court, it is my view that the adjudication officer is not under any common law duty of care. In other words I agree with counsel for the Department that his decision is not susceptible to challenge at common law unless it be shown that he is guilty of misfeasance.

Indeed in my view it is a general principle that if a government department or officer in charge with the making of decisions whether certain payments should be made is subject to statutory right of appeal against its decisions he owes no duty of care in private law. Misfeasance apart, he is only susceptible in public law judicial review or to the right of appeal provided by the statute under which he makes his decision.

...

[54] Penlington J commented:

In my view Jones is fatal to the plaintiff’s plea of negligence in carrying out a statutory duty. The reasoning in Jones equally applies to the present case. I find that the defendant did not owe a duty of care to the plaintiff as alleged. Further the combined effect of s 27(3), s 101(4), and the hierarchy of rights of review and appeal available under the Act excludes any right of action at common law for alleged negligence in carrying out the statutory duties prescribed by the Accident Compensation Act. To allow the plaintiff to sue the defendant in negligence for administration of its powers would be to allow him to circumvent the statutory review and appeal provisions contained in that Act.

[55] As Mr Hlavac submits, in Chalecki the District Court had relied on the decision in Pearce and it was before that Court that it was argued that because ACC had not made any reviewable decision in terms of the Act that all common law remedies particularly tortious remedies were available. However the Court decided the statute bar operated to prevent the proceedings and the Court described the “powerful policy reasons” why that was so.

[56] New Zealand law accepts the existence of rights to bring actions in assault or misfeasance in public office. The Court in Chalecki did not accept that it followed therefore that a claim in simple negligence could succeed. The Court said at [38]:

... It would be anomalous if a claimant could sue for allegedly negligent investigation, management or administration of a claim seeking damages in a form not available as compensation under the Act, but could not sue for a negligent decision which is the culmination of such a process.

[57] In Naysmith the Court concluded there was no cause of action for a breach of statutory demand against ACC and that particular claim was struck out. In considering whether the statute bar prevented the negligence claim the Court referred to the decision of the Court of Appeal in Rolls Royce New Zealand Limited v Carter

Holt Harvey⁹. In that case the Court of Appeal said:

...In cases where the defendant is found to have undertaken to exercise reasonable care in circumstances which are analogous to, but short of contract, it is foreseeable that the plaintiff will rely on that undertaking... then, subject to any accountability policy factors, a duty of care will arise.

[58] In Traynor v ACC¹⁰ the Court considered Mr Traynor’s claim of a breach of obligation by ACC to provide him with vocational rehabilitation, of negligently failing to provide rehabilitation, and failing to advise him of his entitlement to it. Mr Traynor relied on the decision in Naysmith. In response the Court said:

[29] Thus it is clear that the decision of the Court not to strike out Mr Naysmith’s claim in negligence was based entirely on the fact that the claim rested on the corporation’s assurance to Mrs Naysmith that it would look after her husband. This was the effective cause of the loss suffered by Mr and Mrs Naysmith.

[59] As Mr Hlavac notes the Court distinguished Mr Traynor’s circumstances

saying at [30]:

The same cannot be said for Mr Traynor. Here, there is no allegation of any assumption of responsibility outside the statutory regime. The claim rests solely on allegations that the corporation is in breach of its obligations to exercise reasonable care in providing the range of entitlements Mr Traynor had under the Act. It does not come within the limited ambit of the decision in Naysmith.

⁹ _{[2004] NZCA 97; [2005] 1 NZLR 324.}

¹⁰ HC Wellington, 14/10/2012 Matthews AJ.

[60] Also for consideration is the High Court’s decision in Taylor v Taite¹¹. In that case the High Court considered a question of the distribution of attendant care entitlements between family members. That case was decided under the 1982 Act where ACC had discretion to make payment to family members who provided attendant care. The mother of a disabled child received a large back payment for attendant care. The child’s grandmother who had provided some of that care claimed for a share of the back payment. The Court concluded that back paid attendant care compensation was due to be paid to the injured person, but on the basis that it was used to reimburse caregivers. The Court found the duty to pay for attendant care was owed to the claimant and not the carer even though the Act provided for payment directly to the carer.

Conclusion

[61] In this case ACC granted the plaintiff’s son cover for injuries he suffered. The range of entitlements for that cover included attendant care. ACC agreed to meet the costs of the provision of 13 hours per week attendant care for the son.

[62] The plaintiff on behalf of her son challenged the adequacy of that provision. A reviewer said ACC incorrectly calculated what was due and a recalculation was directed.

[63] The plaintiff has made a claim calculated on the losses she said occurred to her because of the shortfall paid to her son.

[64] The plaintiff says her losses were a foreseeable consequence of the failure of ACC to pay sufficient for her son. The plaintiff says that ACC owed a duty of care to her in the circumstances and that being in breach of that duty to her entitles her to a remedy which remedy is not related to the payment of the entitlement but

_{consequential damages arising out of an alleged statutory breach.}

¹¹ M 13/00, HC, Rotorua, 23/05/02.

[65] It seems to the Court in this overview of matters the claim of a separate duty to the plaintiff somewhat loses its identity because it is all about the consequences of the inadequacy of a payment due to her son.

[66] In Chalecki the Court considered that the remedies available were entirely those prescribed by the Act. The Court said there was nothing in the Act which entitled payment to another of the losses they claimed.

[67] The Court considers in this case that the only remedy is available to the son and that was to have the extent of the attendant care he needed reassessed – and that is what it did.

[68] What the plaintiff is endeavouring to do is to extend the category of statutory duties available to persons other than claimants and in a way not provided for in the Act and in doing so to give to the plaintiff access to remedies not available to her son.

[69] Parliament clearly defined those who have entitlements under the Act. The plaintiff’s claim seeks to extend the range of remedies available and much wider than parliament could have intended.

[70] There are always in cases involving decisions regarding the extent of entitlements to be provided other persons who will be affected by those decisions.

[71] To widen the scope would mean that anyone in a situation with a relationship with a claimant is therefore able to bring a claim and to seek damages beyond those a claimant would receive.

[72] It seems to the Court that that outcome threatens to undermine the whole purpose of the ACC scheme.

[73] This is a case for damages arising out of cover provided under the Act.

[74] There would be no basis for the plaintiff’s claim had the son not been injured and offered funding by ACC for the son’s care. A review of case authority suggests

Court’s have been very cautious about extending the range of circumstances that might justify claims by others connected to that person for whom the entitlement was granted. In this case the claim of the plaintiff places considerable reliance upon the decision in Naysmith. But that case is about the failure of ACC to provide that which it said it would provide. This case is different because there was no separate indication by ACC of what it would provide outside of its statutory obligations.

[75] The Queenstown Lakes case agreed that a duty of care was owed to someone other than the claimant but that occurred because of a secondary injury which occurred to the other person in that event in which the claimant was injured.

[76] It is clear from the Court’s decision in Chalecki that any claim entitlement is limited to what the Act says can be paid.

[77] In this case the plaintiff seeks damages not available to her son by seeking an extension of existing duties of care to her.

[78] For the plaintiff it is argued the claim is fact specific and decisions about whether or not a duty of care was owed ought to be left for trial. The Court disagrees. It is clear that if relief at all was to be provided to the plaintiff then ACC is at risk of potential claims from a very wide class of people.

[79] There appears nothing in the Act that extends rights to third parties. The purpose and policy of the Act would be at risk if this claim was accepted because while the son cannot bring the claim someone close to him would and would receive entitlements not available to the son.

[80] It cannot be that the plaintiff’s claim is not connected to her son’s injury for it is ACC’s judgment of his claim for attendant care that founds her claim of a duty of care.

[81] The Naysmith case did not dismiss the negligence claim as it did the breach of statutory duty claim, because of a clear representation that a certain degree of care

and cost would be provided, but it was not. It was not an issue about the adequacy of the provision of care, but about not delivering what was promised.

[82] But, the issues are not just about the structure of the claim referring to negligent breach and thereby avoiding any connection with a claim of breach of statutory duty. That would be too straightforward and should not avoid addressing the claim’s perspective in a broader context.

[83] It only arises because of claims ACC provided inadequate support for her son and because on review ACC was required to provide more. Should it follow in that outcome that ACC had a duty of care to a person (mother or other) who claims she had to pay or provide more than otherwise she would have.

[84] It is very much a case about the extent to which the present state of the law should be prepared to extend its ability to assist those claims.

[85] Considerations of public policy and duty of care do not, this court considers, admit to claims of the kind in this case.

Result

[86] It is the Court’s finding that this claim is statute barred by s 317 of the Act; that even if it was not statute barred no duty of care is owed to the plaintiff and nor is there any basis for imposing such upon ACC; and the plaintiff’s claim provides no basis for creating an exception in finding a duty to prevent pure economic loss as in this case.

Judgment

[87] The claim is struck out.

_{[88] The plaintiff shall pay the defendant’s costs calculated on a 2B basis.}

Associate Judge Christiansen