Accident Compensation Corporation v Samuela

[2025] NZHC 1935

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV-2025-404-130

[2025] NZHC 1935

UNDER

The Accident Compensation Act 2001

IN THE MATTER OF

An appeal of a decision of the District Court under s 162 of the Act

BETWEEN

ACCIDENT COMPENSATION CORPORATION

Appellant

AND

SONNY SAMUELA

Respondent

Hearing:

8 July 2025

Appearances:

C J Hlavac for the appellant

H Peart and E Manga for the respondent

Judgment:

15 July 2025

JUDGMENT OF BLANCHARD J

This judgment was delivered by me on 15 July 2025 at 2.00 pm pursuant to Rule 11.5 of the High Court Rules 2016

Registrar/Deputy Registrar

Solicitors:

Young Hunter Lawyers, Christchurch Schmidt & Peart Law, Auckland

ACCIDENT COMPENSATION CORPORATION v SAMUELA [2025] NZHC 1935 [15 July 2025]

[1]    The Accident Compensation Corporation (ACC) appeals against a decision of Judge P R Spiller in the District Court at Wellington dated 22 April 2024 concerning Mr Samuela’s entitlement  to  weekly  compensation  under  the  Accident Compensation Act 2001 (the Act).1

[2]    Mr Samuela was unable to work due to an injury. ACC did not agree to pay him weekly compensation for the period he was unable to work. Mr Samuela was forced to take annual leave and sick leave when he would not otherwise have done so.

[3]    A review established that ACC was required to pay him weekly compensation. In calculating the amount of the weekly compensation, ACC reduced the payments to him by the amount of the leave payments he had received from his employer.

[4]    The issue in the case is whether ACC was right to reduce Mr Samuela’s weekly compensation payments by the amount of the leave payments.

[5]    The reduction of weekly compensation payments is governed by cls 49 to 51 of Schedule 1 to the Act. It is referred to in these provisions as “abatement”. Whether ACC was correct to abate Mr Samuela’s weekly compensation turns on the meaning of the word “earnings” in cl 51(2).

Abatement of Mr Samuela’s weekly compensation

[6]    In May 2021, Mr Samuela injured his right shoulder while playing rugby. ACC granted cover for a shoulder sprain.

[7]    Mr Samuela’s symptoms did not resolve and he was subsequently diagnosed with a rotator cuff tear. In September 2021, he slipped at work and aggravated his injury. He became unable to work and made a request to ACC for weekly compensation. But in October 2021, ACC advised that it was declining to extend cover for the rotator cuff tear. Consequently, it also declined to pay him weekly

1      Samuela v Accident Compensation Corporation [2024] NZACC 70.

compensation on the basis that his inability to work was the result of the rotator cuff tear and not the shoulder sprain.

[8]    Because Mr Samuela was unable to work,  he arranged with his employer,  Le Va, to use his accrued annual leave and sick leave to cover his absence from work in the period between 28 September and 26 October 2021. As I have said, he would not have taken this leave had ACC accepted his claim for weekly compensation.

[9]    After his leave entitlements were exhausted, Mr Samuela returned to work. Had ACC been paying  him weekly  compensation, he would not have gone back    to work so soon. Being forced to go back to work prematurely caused him physical and mental suffering.

[10]   On 28 November 2021, he  was  no  longer  certified  as  unable  to  work.  He continued to work for Le Va though until April 2022, when he resigned and started new employment.

[11]   In February 2022, a review decision quashed ACC’s decisions not to extend cover for the rotator cuff tear and to decline to pay him weekly compensation. ACC was directed to pay backdated weekly compensation for the period from 22 June to 23 November 2021.

[12]   In August 2022, ACC informed Mr Samuela that, in calculating his backdated weekly compensation, it had abated the leave payments he had received from Le Va in the period from 28 September to 26 October 2021.

[13]   Mr Samuela was unhappy with ACC’s decision to abate the leave payments. He therefore reviewed ACC’s decision. But a review decision of 17 November 2022 upheld ACC’s decision.

Appeal to the District Court

[14]   Mr Samuela continued to be unhappy, so he appealed the review decision to the District Court.

[15]   On 14 March 2023, after Mr Samuela had filed his appeal, ACC issued a fresh decision which revoked its decision of August 2022 to abate the leave payments and paid the amount due.

[16]   It appears that ACC recognised the unfairness of the situation and took this step even though it considered that, strictly speaking, it was not legally required to do so.

[17]   ACC took the position that, as a result of its fresh decision, the appeal was moot and should not proceed. But on 6 October 2023, Judge D L Henare determined that the District Court still had jurisdiction to determine the legal issue and would do so.2

[18]   The substantive appeal was heard by Judge Spiller. In his judgment on 22 April 2024, he allowed the appeal.3

Application for leave to appeal to the High Court

[19]   ACC then applied for leave to appeal to the High Court. On 17 December 2024, Judge J Clark granted leave.4

The relevant provisions of the Act

Weekly compensation

[20]   Under cl 32(3) of Schedule 1 to the Act, a claimant is entitled to 80 per cent of their weekly earnings payable as weekly compensation, calculated under cls 33   to 45 and 48 of Schedule 1.

[21]   Under cl 34(2), in the case of a claimant who has been receiving earnings as an employee immediately before they became unable to work, their “weekly earnings” are based on their “earnings as an employee” in the 52 weeks before their incapacity commenced.

2      Samuela v Accident Compensation Corporation [2023] NZACC 162.

3      Samuela v Accident Compensation Corporation, above n 1.

4      Accident Compensation Corporation v Samuela [2024] NZACC 208.

[22]   The term “earnings as an employee” is defined in the general “Interpretation” provisions in s 6 of the Act. It is defined as having the meaning set out in ss 9 to 13 of the Act. It is common ground that the definition includes leave payments.

[23]   Under cl 46, weekly compensation is payable up to a maximum of $1,341.31 per week. Clause 32(5) provides that it must also be adjusted under s 115 of the Act. This includes adjustment on account of abatement under cl 51.

[24]Clause 51 provides:

51 Abatement of compensation

(1)[Repealed]

(2)In calculating weekly compensation under this Part, the Corporation must reduce the amount of weekly compensation paid to a claimant so as to ensure that the total of the claimant’s weekly compensation and earnings after his or her incapacity commences does not exceed the claimant’s weekly earnings as calculated under clauses 33 to 45 or 47.

(3)[Repealed]

(4)The amount of a claimant’s weekly earnings under subclause (2) must be adjusted in the manner provided in section 115.

Definition of “earnings”

[25]   As discussed above, this appeal turns on the meaning of “earnings” in this clause. Specifically, it turns on whether it includes leave payments.

[26]   The uncertainty arises because there is a general definition of “earnings” in s 6 of the Act, but also a specific definition of “earnings” in cl 49 for the purposes of cl 51 Schedule 1.

[27]There are two possibilities here:

(a)The definition of “earnings” that should be used in cl 51 is the one in  s 6 as modified by cl 49. I will refer to this as “interpretation one”.

(b)The definition that should be used is the one in cl 49 standing alone. I will refer to this as “interpretation two”.

[28]   This makes a difference because interpretation one includes all leave payments, whereas interpretation two only includes leave payments made after the termination  of  the  claimant’s  employment.  (Leave  payments  after  termination of a claimant’s employment arise when an employer is required to make a lump sum payment after a claimant’s  employment  ends  because  of  an  unused  entitlement to leave.) Leave payments made during the course of employment, like those received by Mr Samuela, are not included under interpretation two.

[29]   The definition of  “earnings”  in  s  6  is  a  full  one.  It  defines  “earnings” as “earnings as an employee”, “earnings as a self-employed person”, and “earnings as a shareholder-employee.” Section 6 also contains definitions of each of these terms. The definitions refer the reader to meanings set out in ss 9 to 15 of the Act. As I have said, it is common ground that the definition of “earnings as an employee” in ss 9 to 13 of the Act includes leave payments.

[30]In contrast, the definition in cl 49 is a partial one. The clause provides:

49       Earnings definitions for purposes of clause 51

(1)[Repealed]

(2)[Repealed]

(3)In clause 51(2), earnings includes any payment made on the termination  of  employment  in  respect  of   leave   entitlements. The Corporation must treat such a payment as having been derived after the termination of employment for a period that is equal to the total period that the claimant could have taken as leave if the claimant had not received the payment.

(4)In clause 51(2)—

(a)earnings includes payments—

(i)whether made in New Zealand or overseas:

(ii)whether made in New Zealand currency or an overseas currency:

(b)employment includes employment whether in New Zealand or overseas.

(5)Payments made in an overseas currency must be treated as having been converted into New Zealand currency at the average rate of foreign exchange offered, at the date of payment, by registered banks in New Zealand.

(6)In clause 51(2), earnings includes payments of earnings compensation under the Compensation for Live Organ Donors Act 2016.

(7)In clause 51(2), earnings does not include payments of weekly compensation and weekly income compensation under the Veterans’ Support Act 2014.

[31]   It will be seen that, under cl 49(3), earnings include leave payments made    on termination of employment. It says nothing about, and therefore does not include, leave payments made in the course of employment, like those received by Mr Samuela.

The decision under appeal

[32]   The Judge favoured interpretation two. He considered that the definition that should be used in cl 51 is the one in cl 49 standing alone, an interpretation favoured by the text, purpose and context of the Act. Therefore, he concluded Mr Samuela’s payments were not subject to abatement under cl 51.

The meaning of “earnings” in cl 51

[33]   Mr Peart, counsel for Mr Samuela, submitted that interpretation two should apply for reasons that were consistent with those of the Judge. He submitted that it is clear that cl 49 is intended to contain the standalone definition of “earnings” that should be used under cl 51.

[34]   He also submitted that interpretation two should be preferred because it produces a fair outcome. It avoids the unfairness that Mr Samuela experienced.

[35]   Further, Mr Peart submitted that the legislative history supports the conclusion that interpretation two should apply. He said that:

(a)clause 49 as originally enacted required leave payments both during and after a claimant’s employment to be subject to abatement;

(b)in 2008, Parliament amended the clause so that leave payments both during and after a claimant’s employment did not need to be abated; and

(c)in 2010, Parliament amended the clause again to reinstate the requirement that leave payments after termination of a claimant’s employment had to be abated, but not the requirement as to leave payments during the claimant’s employment.

[36]   In my view, interpretation one is the correct one. There is a major problem with interpretation two.   As discussed above, the definition of “earnings” in cl 49    is only a partial one.     It is plain on the face of cl 49 that it cannot stand alone.      In contrast, again as discussed above, the definition of “earnings” in s 6 is a full one. It clearly can stand alone.

[37]   The various definitions in s 6 are preceded by the words, “In this Act, unless the context otherwise requires…”. Thus, the definition of “earnings” in s 6 applies unless the context requires otherwise.   So, it would certainly be possible for cl 49   to exclude s 6, but in my view it does not do so.

[38]   I say this for two reasons. First, as I have said, cl 49 only contains a partial definition. As such, it cannot stand alone and is therefore not fit for purpose to replace the full definition contained in s 6.

[39]   Second, the various relevant subclauses in  cl  49  begin  with  the  words,  “In clause 51(2), earnings includes…”. The use of the word “includes” suggests that cl 49 is merely intended to expand the s 6 definition rather than replace it.

[40]   If interpretation two did apply, leave payments during the claimant’s employment would not have to be abated. But in addition, because the definition of cl 49 is a partial one, there may be uncertainty about what else might or might not have to be abated.

[41]   I agree that what happened to Mr Samuela was unfair. As I have said, he was forced to take annual leave and sick leave when he would not otherwise have done so. It is entirely understandable that he was unhappy about this. It is highly commendable that he proceeded with his appeal to the District Court despite the fact that ACC ultimately decided to reverse the abatement of his leave payments. He did this so that other people would not experience the unfairness he did.

[42]    An affidavit of Martin Shelton of ACC suggests that not many people experience this unfairness. He says that his investigations have identified five other claims  dating  back   to  2020  which  have  involved  similar  circumstances  to    Mr Samuela’s case. This is because the situation in which Mr Samuela found himself only arises in limited circumstances, namely if:

(a)a claimant is forced to use annual leave because ACC delays in paying weekly compensation or declines to do so but its decision is later reversed or overturned; and

(b)ACC is not able to approach the claimant’s employer to seek agreement to the claimant paying back the leave payments, so the claimant’s leave entitlement can be reinstated. Mr Shelton said that this is ACC’s standard practice when such a situation arises. But in a few cases, including Mr Samuela’s, ACC is not able to deal with matters in that way because the claimant has left their employment or their employer, for some other reason, does not agree to reinstate the leave entitlements.

[43]   Despite this evidence, I accept that an interpretation that avoids the unfairness Mr Samuela and some others have experienced should be preferred, provided that interpretation is reasonably available and does not produce other adverse consequences. But, for the reasons set out above, I do not think that interpretation two is reasonably available or that it would not produce other adverse consequences.

[44]   Finally, I agree with Mr Hlavac, counsel for ACC, that Mr Peart’s submission regarding the legislative history is incorrect. Mr Peart is right that cl 49 as originally enacted required leave payments both during and after a claimant’s employment

to be abated. But I do not think it is correct that in 2008 Parliament amended the clause so that leave payments both during and after a claimant’s employment did not need to be abated.

[45]Sub-clauses 49(2) and (3) as originally enacted said:

(2)In clause 51(1), earnings includes any payment (in addition to a payment for work actually undertaken by the claimant) made by the claimant’s employer during the claimant’s incapacity that exceeds the difference between—

(a)the level of the claimant’s actual earnings immediately before his or her incapacity commenced; and

(b)the level of the claimant’s weekly compensation.

(3)In clause 51(1) and (2), earnings includes any payment made on the termination of employment in respect of leave entitlements. The Corporation must treat such a payment as having been derived after the termination of employment for a period that is equal to the total period that the claimant could have taken as leave if the claimant had not received the payment.

[46]   In 2008, Parliament made  amendments  to  cl  49  that  included  the repeal of cl 49(2) and the amendment of cl 49(3) to read, “In clause 51(2), earnings does not include any payment made on the termination of employment in respect of leave entitlements”.

[47]   Mr Peart says that the effect of the amendments was that leave payments both during and after a claimant’s employment did not have to be abated. I agree with him insofar as payments made after termination of employment are concerned. But I do not think he is right about payments made during employment.

[48]   On review of the legislative history, I cannot agree with Mr Peart’s suggestion that cl 49(2) was repealed so that leave payments during a claimant’s employment did not need to be abated.

[49]   Under cl 51 as originally drafted, it was necessary for ACC to abate under both cl 51(1) and (2). The wording of cl 51(1) and (2) as originally enacted was:

(1)In calculating weekly compensation under this Part, the Corporation must reduce the amount of weekly compensation paid to a claimant by—

(a)24 cents for every $1 of earnings derived during the period of incapacity in excess of $56.67 a week, but not in excess of $90.62 a week; and

(b)56 cents for every $1 of earnings derived during the period of incapacity in excess of $90.62 a week.

(2)The Corporation must also reduce the amount of weekly compensation paid so as to ensure that the total of the claimant’s weekly compensation and earnings after his or her incapacity commences does not exceed the claimant’s weekly earnings as calculated under clauses 33 to 45 or 47.

[50]   It will be seen that cl 51(1) and (2) provided for two different methods for abatement. ACC was required to apply both methods.

[51]   In 2008, cl 51(1) was repealed by Parliament because the method for abatement under it was complicated  and  potentially  discouraged  claimants  from  returning  to work.5   The result was ACC was only required to abate using the method under   cl 51(2), which remains the case today.

[52]   It was as a consequence of Parliament’s decision to repeal cl 51(1) that cl 49(2) was repealed. While cl 49(3) (as originally enacted) applied to both cl 51(1) and (2), cl 49(2) only related to cl 51(1). Once cl 51(1) was repealed, cl 49(2) was redundant and also needed to be repealed.

[53]   Further, Mr Peart’s submission that the amendments were intended to achieve the outcome that leave payments during employment did not need to be abated is not supported by the explanatory note to the amendment bill. The explanatory note says that the amendments will mean that leave payments made after termination of employment will not be liable to abatement. But it is silent on the effect it will have on leave payments made during employment. Had a change of this significance been intended, the explanatory note would surely have said so.

5      Injury Prevention, Rehabilitation, and Compensation Amendment Bill (No 2) 2007 (170-1) (explanatory note) at 6.

[54]   In 2010, cl 49(3) was amended again so that it reads as it does now and requires leave payments made on termination to be abated. As I have said, Mr Peart says that after this amendment, leave payments after termination of a claimant’s employment had to be abated but leave payments during the claimant’s employment did not. But, for the reasons given above, I do not think he is correct that, prior to the 2010 amendment, leave payments during the claimant’s employment did not have to be abated.

[55]   For these reasons, my conclusion is that interpretation one is the correct one. The definition of “earnings” that should be used in cl 51 is the one in s 6 as modified by cl 49. Accordingly, ACC was entitled to abate Mr Samuela’s leave payments.

Law reform

[56]   While I agree that ACC’s interpretation is correct in law, I also consider that it will result in unfairness in some cases, as it has in Mr Samuela’s case. The relevant provisions may well benefit from law reform.

Result

[57]I allow the appeal.

[58]   I declare that ACC was entitled to abate Mr Samuela’s weekly compensation payments with reference to leave payments he received during his employment.

[59]   If the parties cannot agree on costs, they should file memoranda of no more than two pages each and I will determine costs on the papers.

Blanchard J