IN THE HIGH COURT OF NEW ZEALAND WELLINGTON REGISTRY

I TE KŌTI MATUA O AOTEAROA TE WHANGANUI-A-TARA ROHE	
CIV-2020-485-226
[2020] NZHC 2523	

IN THE MATTER	of an appeal under s 111 of the Accident Compensation Act 1982	
BETWEEN	ADRIAN VAN DER EIK
Appellant	
AND	ACCIDENT COMPENSATION CORPORATION
Respondent	

Hearing:	17 August 2020	
Appearances:	A Beck for the Appellant
I G Hunt for the Respondent	
Judgment:	25 September 2020	

JUDGMENT OF COOKE J

Table of Contents
Procedural issue	[5]
Approach to interpretation	[13]
Retirement leave	[15]
The statutory interpretation issues	[19]
Remuneration under s 52(2)(a)	[21]
Excluded as superannuation or a lump sum retirement allowance	[25]
Is it long service leave pay?	[30]
Is it normal average weekly earnings?	[37]
Conclusion	[47]

[1]	The appellant appeals against a decision of the Accident Compensation Appeal Authority dated 23 October 2019.1    The Authority determined that the calculation of

1	van der Eik v Accident Compensation Corporation [2019] NZACA 7 [Authority decision].

VAN DER EIK v ACCIDENT COMPENSATION CORPORATION [2020] NZHC 2523 [25 September 2020]

the appellant’s earnings related compensation should not take into account retirement leave provided to the appellant under s 79A of the Police Regulations 1959 (the Regulations) following his retirement from the police force on medical grounds. The appellant’s entitlements arise under the now repealed provisions of the Accident Compensation Act 1982 (the Act). Under s 111 there is a right of appeal to the High Court from a decision of the Authority, with leave. By decision dated 6 May 2020 leave was granted.2

[2]	Mr van der Eik left the Police in 1991 due to mental health issues following 13 years in the force. When he left the Police paid him out for untaken annual leave he had accumulated. It also paid him out for his retiring leave entitlement under r 79A of the Regulations. The payment for accrued annual leave was partially taken into account by the Corporation when calculating his earnings related compensation. But the Corporation did not take into account the retiring leave.

[3]	On appeal the Authority accepted that the annual leave that had accrued in the 12 months before he left the police force was properly taken into account in assessing his earning related compensation, but not leave that accrued in previous years. That decision is not challenged on appeal.

[4]	In terms of the retiring leave the Authority accepted that such leave fell within the concept of “earnings as an employee” under s 52(2)(a) of the Act, but it found that it was not relevant to the assessment of earning related compensation under s 53 as it was not part of his “normal average weekly earnings”. The Authority held:

[41] … it is excluded from relevant earnings because it is a one-off lump sum payment which, on no basis, could be said to fairly and reasonably represent normal average weekly earnings. As a lump sum payment made to Mr van der Eik only once in a career of about 13 years in the police, it cannot be said to "fairly and reasonably represent his normal average weekly earnings" at any time, whether at the time of incapacity or otherwise. It is anomalous earnings. It is not excluded from earnings (s 52), but it does not fall within the definition of relevant earnings (s 53).

2	van der Eik v Accident Compensation Corporation [2020] NZACC 42

Procedural issue

[5]	Before dealing with the substance of the arguments to be addressed, I deal with a preliminary issue concerning the scope of the issues.

[6]	As indicated the Authority concluded that the retiring leave payment came within the meaning of “earnings as an employee” under s 52, but held that it was not within the concept of “normal average weekly earnings” under s 53. After the appeal was brought the Corporation filed a notice of cross-appeal dated 15 June 2020. In it the Corporation challenged the finding of the Authority that the retirement leave was within the meaning of “earnings as an employee” under s 52.

[7]	For the appellant Mr Beck argued the Corporation could not do so. There was no right to bring a cross-appeal in this way as no leave to appeal this issue had been sought or granted. In response Mr Hunt argued that no leave was required to bring the cross-appeal as there was a right to bring a cross-appeal under r 20.11 of the High Court Rules 2016.

[8]	With respect these arguments seem to be misguided. As with an appeal, a cross-appeal is only necessary if the cross-appellant wishes to change the relevant decision. Appeals are not brought against steps in a reasoning process. That is reflected in r 20.11 of the High Court Rules in relation to cross-appeals as it provides that a respondent “wishing to contend that the decision appealed against should be varied” must bring a cross-appeal.

[9]	I agree with Mr Beck that a cross-appellant would need to obtain leave to appeal if leave to appeal is required by the underlying legislation. The High Court Rules do not override any such requirement in the underlying legislation. But that is only when a cross-appeal is required. A cross-appeal is not required because the respondent says that the steps in the reasoning process adopted by the lower body are not correct. That argument can simply be advanced as part of the respondent’s submissions.

[10]	Here the Corporation’s challenge to the Authority’s acceptance that the retirement leave did amount to “earnings as an employee” under s 52 is merely a step

in the reasoning process. I accept Mr Beck’s point that it is a very important step, but it is still just a step. The ultimate decision of the Authority is that the retirement leave payment was not relevant to the calculation of earnings related compensation. The Corporation does not seek to vary that decision. That means there was no requirement on the Corporation to bring a cross-appeal.

[11]	Part 20 of the High Court Rules does not include provision for a respondent to give notice of an intention to support the judgment on alternative grounds as is provided for in other appeal regimes.3 That is a procedure employed when a party wants to say that the ultimate decision was right, but for different reasons. A respondent can be expected to advise of an intention to do so, potentially during the case management of the appeal. Such notice gives fair warning to an appellant of matters that will be argued in the appeal. Part 20 can be expected to be applied so that there is no procedural unfairness notwithstanding there is no process to this effect, including through the requirement for written submissions.

[12]	Here filing and serving the cross-appeal did fairly bring to the appellant’s attention that the Corporation wanted to contest the Authority’s reasoning on this point. It cannot be criticised in a substantive sense, even though it was not necessary. The appellant chose not to engage with those issues in his written submissions, although at the hearing Mr Beck was able to do so in his oral submissions. That is hardly surprising given that the relevant interpretation questions are inherently interlinked.

Approach to interpretation

[13]	Before turning to the questions of interpretation that arise, I also briefly address the approach to interpretation.

[14]	Mr Beck submitted that the purposive approach described by the Supreme Court in Commerce Commission v Fonterra Co-operative Group applies.4 I agree. The general approach to ACC legislation has been considered in previous decisions of

3	See, for example, r 33 of the Court of Appeal (Civil) Rules 2005.
4	Commerce Commission v Fonterra Co-operative Group [2007] NZSC 36, [2007] 3 NZLR 767.

the Court of Appeal.5 In McKeefry v Accident Compensation Corporation I suggested that notwithstanding some of the observations made in those cases, the standard purposive approach applied equally to ACC legislation.6 The task involves interpreting the text of the enactment in light of its purpose in order to make the legislation work as Parliament must have intended. That decision dealt with matters under the Accident Compensation Act 2001, but I made the following observations that seem generally applicable to the approach under the present Act:7
[9] Here the Act’s purpose is described in a broad  way in  s  3. This  includes achieving its purposes through “ensuring that … claimants receive fair compensation for loss from injury, including fair determination of weekly compensation” (s 3(d)). It has rules within that scheme that provide for this. They can lead to arbitrary cut-off points, and accordingly anomalies. It would probably be impossible to devise such a scheme without them. Nevertheless the scheme must be made to work as intended, adopting the normal purposive approach, remembering that the fair determination of weekly compensation is amongst those purposes.

Retirement leave

[15]	I first identify Mr van der Eik’s entitlements that are in issue. In many cases a person’s employment entitlements would be ascertained by the terms and conditions of their employment contract. But in the case of police officers their terms and conditions can also be found in the Regulations. The particular provisions that are relevant in the present case are as follows:

79      Retiring leave—On retirement, after attaining the age of 60 years or in accordance with section 35 of the Government Superannuation Fund Act 1956, and after not less than 10 years’ service, members shall be entitled as of right to the retiring leave prescribed in parts A and B of the table set out in the Fourth Schedule hereto.

79A Retiring leave on medical grounds—(1)  Any permanent member  may relinquish office on medical grounds and be eligible for retiring leave as of right, if—

(a)	He is accepted for retirement by the Superannuation Board in terms of section 36 of the Government Superannuation Fund Act 1956; or

(b)	Not being a contributor to the Superannuation Fund, he produces medical evidence to satisfy the Commissioner that the retirement

5	Accident Compensation Corporation v Algie [2016] NZCA 120, [2016] 3 NZLR 59 at 14–15; J v Accident Compensation Corporation [2017] NZCA 441, [2017] 3 NZLR 804 at 37; and Robertson v Accident Compensation Corporation (2007) NZAR 193 (CA) at 49.
6	McKeefry v Accident Compensation Corporation [2019] NZHC 612.
7	The 1982 Act had a similar purpose — see s 26.

would be so accepted by the Superannuation Board were the member a contributor; or

(c)	He is compulsorily retired on medical grounds in terms of section 28 of the Act; or

(d)	The member leaves the Police through compulsory disengagement under section 28C of the Act or through voluntary disengagement under section 28D of the Act.

(2) Leave entitlement under this regulation shall be 65 days where service does not exceed 25 years, and in every other case shall be in accordance with Part B of the Fourth Schedule hereto.

…

[16]	The leave entitlement described in r 79A is commonly referred to as a PERF, and to PERFing (by reference to the Police Employment Rehabilitation Fund). A person entitled to this leave may “cash up” that entitlement so that it is reflected in monetary terms.

[17]	Under r 79A(2) a police officer retiring for such medical reasons is entitled to
65 days retirement leave for the first 25 years of service, and then he or she accumulates further days in accordance with the fourth schedule. The fourth schedule sets out a table showing an incremental increase to the number of leave days every two months between 25 years and 40 years, finishing at 40 years at 131 days.

[18]	Here the appellant had not reached the age of 60, but had been in the force for 13 years when he retired. He was not entitled to leave under r 79, but was entitled to 65 days leave under r 79A.

The statutory interpretation issues

[19]	It seems to me that the interpretation of the relevant provisions in issue is appropriately considered in four steps, namely:

(a)	Is retirement leave under r 79A one of the forms of remuneration contemplated by the initial words in s 52(2)(a)?

(b)	If so, is it excluded as a lump sum payment covered by s 52(2)(a)(i), or under s 52(2)(a)(ii)?

(c)	If it is, is it nevertheless an exception to the exclusion within the words in brackets in s 52(2)(a)(i) — “other than accrued holiday pay or accrued long-service leave pay”?

(d)	If so, does it form part of the “normal average weekly earnings” referred to in s 53(1) and (2)? If it is then the assessment will include it within one of the subsections referred to in s 53(2).

[20]	I will address each of those steps, and the contentions of Mr Beck and Mr Hunt on each of them in turn.

Remuneration under s 52(2)(a)

[21]	The first step is whether Mr van der Eik’s retirement leave entitlement falls within the preliminary words of s 52(2)(a). It provides:

52	Calculation of earnings

…

(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 …

[22]	I did not understand the parties to be in disagreement about this step. These initial words of s 52(2)(a) appear all encompassing, and seek to identify the components that can make up a person’s remuneration in a broad way. This is particularly confirmed by the residual words “or remuneration of any kind paid or payable”.

[23]	The difference between the parties is nevertheless foreshadowed in this provision. Mr Hunt’s acceptance that these words applied did not encompass an acceptance that some of the particular categories referred in the subsection were

applicable. I understood Mr Beck to contend that the retirement leave payment fell within the words “long-service leave pay”. That particular matter is the issue arising in relation to the third step described above, and is more appropriately dealt with at that point. I also note that payments in relation to leave appear only to cover particular types of leave — namely holiday and long service leave. The Authority has previously held that this does not cover sick leave.8

[24]	I nevertheless agree that  the payment  falls within the preliminary words  in  s 52(2)(a). That, indeed, has been the stance of the Corporation and the Authority. The key question is whether it is subsequently excluded from this broad starting point.

Excluded as superannuation or a lump sum retirement allowance

[25]	There is then an exclusion from the broad definition set out in s 52(2)(a). The section goes on to say that such payments amount to “earnings as an employee” unless they are:

(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 or any reason; or

(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 first-mentioned person is or has been the spouse or a child or a dependant; or

…

[26]	I did not understand Mr Hunt to argue that (ii) applied. The cashed-up retiring leave is not a payment “by way of superannuation, pension or annuity”. But Mr Hunt does contend that it is within (i) as a lump sum payment by way of “retiring allowance”, or “gratuity”.

[27]	The Authority appears not to have agreed with Mr Hunt’s argument on the basis that a payment in lieu of retiring leave is different in nature from a retiring allowance. The Authority contemplated that a “retiring allowance” equated to the use

8	Williams v Accident Compensation Corporation NZACC 213/94, 28 July 1994.

of those words in the Government Superannuation Fund Act 1956.9  I understood   Mr Beck to support that interpretation.

[28]	This approach seems to me to be unduly technical. The section does not cross- reference the specified terms of that legislation, and neither is “retiring allowance” a defined term in the Act. The main superannuation benefits are excluded as a consequence of (ii). The terms of (i) capture an additional exclusion using different language — a “retirement allowance”. What is contemplated is a purposive carveout of superannuation/retirement lump sum payments.

[29]	Interpreting the text in light of its purpose it seems clear to me that Mr van der Eik’s cashed up retiring leave payment is a lump sum retirement allowance. It is a lump sum payment provided to someone on their retirement. Accordingly I disagree with the Authority’s approach on this point, and agree with Mr Hunt’s submission.

Is it long service leave pay?

[30]	But there is then the next step. The words in the round brackets in (i) must be applied.

[31]	Mr Hunt submitted that the payment was excluded once it is within the concept of a lump sum payment by way of gratuity or retiring allowance. He argued that if it was so classified, then it could not be within the words in round brackets. It was either one, or the other. I do not agree. A payment that is a lump sum payment by way of gratuity or retiring allowance can be accrued holiday or long service leave pay if it is it is not so excluded. It is an exception to the exclusion.

[32]	The question then is whether the cashed up retiring leave is accrued holiday or long service leave pay. On this issue the Authority held:

[27] As there is no minimum period of service for eligibility for retiring leave, payment in lieu is not “long-service leave pay” as provided in s 52(2)(a). However, I consider it to be just another “holiday pay” or “accrued holiday pay” entitlement in lieu of what is merely additional leave for those who retire for medical reasons.

9	Authority decision, above n 1, at [26].

[33]	Mr Hunt supported the reasoning in the first sentence of this paragraph.

[34]	Although I agree with the Authority’s ultimate conclusion on this point, I do so for slightly different reasons. In my view the payment to Mr van der Eik was in the nature of a long-service leave payment. The retiring leave entitlement under r 79A involves a base entitlement to 65 days, which is then incrementally increased when the person has been with the Police for more than 25 years up to a total of 131 days once they have been in the force for 40 years or more. The accumulation after 25 years is naturally seen as long service leave. I do not accept that the s 79A payment loses that character simply because there is a base entitlement that exists for the first 25 years of service. Mr Hunt sought to argue that the position would be different if a police officer only started accruing the base entitlement after a period of service. But it seems to me that the provisions should be interpreted purposively such that the base payment for the first 25 years is also long-service leave pay.

[35]	That approach is supported by the fact that r 79 and r 79A are each addressing entitlements to leave on retirement, but with s 79A dealing with a position of someone retiring early on sickness grounds. It is all directed to leave generated by reference to the period of service in the police, and which increases the longer the person stays in the police force, albeit with a base entitlement.

[36]	In any event, the purposive approach appears to have been the reason why the Authority categorised this payment as just another form of accrued “holiday pay”. I rather see it as more naturally falling within accrued “long-service leave pay”, but I see strength in the Authority’s view if it were not. It follows that I agree with the Authority’s ultimate conclusion. That is that the lump sum payment for retirement leave is not excluded under s 52(2)(a)(i) as it falls within the exception as accrued long service leave pay (or, alternatively, holiday pay). Accordingly it was rightly treated as part of Mr van der Eik’s “earnings as an employee” under s 52.

Is it normal average weekly earnings?

[37]	The final step is whether these earnings were part of Mr van der Eik’s “normal average weekly earnings”. In a sense the questions addressed above are preceding questions — what earnings are able to be considered for the purpose of making the

determination under s 53? The preceding questions address what is “in the pot” for the purpose of the substantive assessment, which is to be made under s 53.

[38]	The relevant provisions of s 53 are as follows:

53	Relevant earnings

(1)	Subject to this Act, for the purpose of determining the amount of any earnings related compensation payable to an earner, or payable at any time to any dependant of such an earner, the amount of his relevant earnings shall be such amount as, in the opinion of the Corporation, would, at the time of the accident, fairly and reasonably represent his normal average weekly earnings, having regard to such information as the Corporation may obtain regarding his earnings before the time of the accident and his earnings at the time of the accident, and the period of his residence in New Zealand before the time of the accident and his work history, and such other relevant factors as the Corporation thinks fit.

(2)	If the earner was an employee at the date of the accident and was not then also a self-employed person and had not been a self-employed person at any time during the period of 12 months immediately preceding the date of the accident, in fixing his relevant earnings under subsection (1) of this section,—

(a)	The Corporation may have regard, in the first place, to the amount of his weekly earnings as an employee at or about the time of the accident, or (if the Corporation in its discretion so decides) the amount of his earnings as an employee at or about the time of the accident when converted in such manner as the Corporation considers appropriate to a weekly basis; but

(b)	If, in the opinion of the Corporation, the amount ascertained under paragraph (a) of this subsection would not, at the time of the accident, properly represent his normal average weekly earnings, the Corporation may then have regard to the amount of his average weekly earnings during the period of 28 days immediately preceding the date of the accident, or such part or parts of that period as the Corporation may consider as appropriate for the purpose; but

(c)	If, in the opinion of the Corporation, the amount ascertained under paragraph (b) of this subsection also would not, at the time of the accident, properly represent his normal average weekly earnings, the Corporation may then have regard to his average weekly earnings during the period of 12 months immediately preceding the date of the accident or such part or parts of that period as the Corporation may select for the purpose:

Provided that nothing in this subsection shall preclude the Corporation from having regard also to such other factors as it may consider relevant for the purpose of subsection (1) of this section.

…

[39]	The overall scheme of s 53 is apparent. The Corporation must form an opinion on what earnings “fairly and reasonably represent [the] normal average weekly earnings” of the person. To do so the Corporation first looks at the weekly earnings about the time of the accident under s 53(2)(a). If that amount does not “properly represent” the normal average weekly earnings the Corporation then look to the period of 28 days before the accident under (b). If even this amount does not “properly represent” normal average weekly earnings the Corporation can look at the period of 12 months immediately preceding the date of the accident under (c).

[40]	Even then there is a final step arising from the concluding words of s 53(2) — the Corporation might still consider other relevant factors for the purpose of determining the amount which would “fairly and reasonably represent [the] normal average weekly earnings” under s 53(1). It is a residual step that means that the Corporation is not completely limited to past earnings in the three specified periods when making the assessment. The ultimate task is to ascertain an amount that fairly and reasonably represents the normal average weekly earnings within the increasing period being applied if, for any reason, the lesser period does not achieve that objective. The overall approach was described by Archibald Blair in the following way:10

The dominant purpose of s 53 is that a method will be selected which will produce a result giving a fair reflection of past earnings. The circumstances of claimants will of course vary. Whereas in some situations it will be appropriate to focus attention on the immediate pre-accident period, in other cases it may be reasonable to select a more lengthy time to attain a fair average
– when for example the claimant has a habit of working irregularly or where there are “ups and downs” in his salary or income… In coming to its decision about the period to select the Corporation should be neither generous or mean, but fair and reasonable.

10	A P Blair Accident Compensation in  New  Zealand  (2nd  ed,  Butterworths, Wellington,  1983 at 133).

[41]	The Authority concluded here that the long service leave pay was not part of the normal average weekly earnings at all. Rather it was a lump sum payment that represented anomalous earnings.11

[42]	Mr Beck argued that the Authority erred in reaching this conclusion. He argued that the fact that it was a lump sum cannot be determinative, nor can the fact it was made on a single occasion. Indeed that was the whole point — it was a recognition that his working life was coming to an end.

[43]	But these points do not mean that this payment was part of Mr van der Eik’s normal average weekly earnings. Mr van der Eik became entitled to the base entitlement to this leave when he first joined the police force. He was not accruing any additional entitlement in any of the periods of time leading up to the point of his incapacitation. That is so whether you looked at the preceding week, 28 days, or 12 months. This entitlement was not part of his weekly earnings in any of these periods at all. It is accordingly not part of any average of those earnings.

[44]	The position would be different if his incapacity arose at some stage after he had been in the police force for 25 years. From that stage under the scheme he would be earning additional retirement leave under s 79A and the Part B of Schedule 4 of the Regulations. He would be accruing that as additional earnings as the weeks went by. He would then have lost the ability to accrue additional leave as a result of his incapacity in the same way as he was losing his normal pay. That is why it would have been within the assessment of part of his normal average weekly earnings. But that is simply not the position he was in.

[45]	Mr Beck sought to argue that the base entitlement could be apportioned in some manner over the full period of Mr van der Eik’s employment, and that it could thereby be seen as part of his average weekly earnings. That approach would mean that the longer Mr van der Eik had been in the service, the less the retiring leave contribution to his average earnings would be. That is because the base sum would be spread over more and more weeks. With respect that seems to me to demonstrate the weakness of the argument, and why such an apportionment exercise would be artificial. It

11	See passage quoted at [4] above.

demonstrates why the base amount to which Mr van der Eik was entitled on the first day of his employment could not realistically be said to represent part of his average weekly earnings 13 years later.

[46]	Although it was not expressly referred to in Mr Beck’s argument, I have considered whether the base entitlement could be addressed under the concluding words of s 53(2) where the Corporation can consider other factors when assessing a person’s normal average weekly earnings. But I have concluded that, for essentially the reasons adopted by the Authority, the concluding words do not address this situation. This proviso is likely to be directed to particular cases where looking at the past periods under s 53 do not fairly capture the position. For example it might apply to a person who was on the cusp of having a significant increase in their earnings as an employee not reflected in the earnings in any of the past periods.12 But that is not the situation here. As the Authority found this payment is not part of the fair and reasonable assessment of the normal average weekly earnings. There was a potential future entitlement that would have arisen once Mr van der Eik had been in the service for 25 years, but given that he had been in the police service for only 13 years at the time of his incapacitation the future entitlement was too remote, and could not be said to fairly be part of his normal weekly average earnings.

Conclusion

[47]	For these reasons the appeal is  dismissed.  I agree with  the Authority that Mr van der Eik’s retiring leave allowance amounted to “earnings as an employee” under s 52 of the Act, and also agree that it did not form part of his “normal average weekly earnings” under s 53.

[48]	The Authority’s approach coincides with the purpose of the legislation. To determine earnings related compensation, the Corporation is instructed to look back at what the person was earning in the periods leading up to the accident.13 That is what a person loses when they can no longer work. Earnings related compensation is calculated based on those average weekly earnings. Mr van der Eik did not lose any

12	Consider, for example, the situation in McKeefry v Accident Compensation Corporation, above n 6.
13	In this case the moment of incapacitation qualifying the appellant for cover.

retiring leave under s 79A as a result of no longer being able to work. He retained his full base entitlement to that leave. It is possible that had he stayed in the force beyond 25 years he would have accrued additional such leave, but the ability to begin accruing such an entitlement some time in the future is not within the calculations of earnings related compensation.

[49]	If there is any issue about costs, a memorandum may be filed within 10 working days of the release of this judgment, with a memorandum in response within five working days.

Cooke J

Solicitors:
Peter Sara, Dunedin for the Appellant
Young Hunter, Christchurch for the Respondent