A company set up by the Government to handle ACC disputes is now owned by staff. But can FairWay Resolution act impartially when those employed have a financial interest in its performance and why was it not put up for tender? Shane Cowlishaw reports.
An ACC disputes service that was sold by the Crown without consultation is still operating under a conflict of interest, lawyers say.
FairWay Resolution Ltd was formed in 1999 by ACC to handle the first step of disputes. It morphed into an independent Crown entity in 2011.
Following objections by ACC claimants about the fairness of the system a review was ordered, headed up by Miriam Dean QC.
It was heavily critical of the sector and, following the release of the report, FairWay was sold to an employee trust for $6.5 million in July in a move to improve its independence.
Upon its sale, FairWay’s oversight under the Official Information Act was removed as it then became a private entity.
The bulk of FairWay’s earnings come from its contract with ACC, which includes various KPI and performance clauses.
Several lawyers spoken to with expertise in the area were alarmed and worried at the potential conflict of interest that could develop with staff who had a financial interest in the company making decisions that were supposed to be independent.
That potential conflict has been highlighted in a transcript of a phone conversation between an ACC case manager and a FairWay employee that was provided to Newsroom.
While discussing a particular case the pair talk about the lawyer involved, mentioning he has likely requested a conciliation meeting so he “gets paid” and bemoaning the fact the lawyer will likely arrive armed with “a file the size of a house” and “hundreds of pages of waffle”.
Wellington-based John Miller said it was completely inappropriate for one side to be having a conversation without the other being informed.
“I don’t think you should talk to any one of the parties without the other party there, even if you have a hearing you should all leave together rather than linger around to have a chat. It’s even more worrying if they’re having conversations on the phone with case managers.”
The original problem was that FairWay was directly owned by ACC, but as far as he could tell there were still questions about how reliant the company was on the relationship.
“What’s that French phrase? The more things change the more things stay the same.
“It was a surprise, fait accompli. You think ‘oh, if they’re selling it to the staff on one level it’s a good thing to do, on the other level they’ve got a real interest in decision-making and profits’,” Miller said.
Dunedin barrister Warren Forster, who has been an outspoken voice on ACC issues, said the ownership of the company was beside the point.
FairWay’s contract with ACC required it to provide monthly reports on its decision-making and its compliance with key performance indicators, which was the main concern about the organisation’s independence, he said.
“The real issue is the financial dependence and secrecy created by the contractual relationship, which put the balance of power clearly in ACC’s favour.
“It’s the contract that needed to change, not whether the Minister owns the company.”
Newsroom has also spoken to an ex-FairWay reviewer who said the company was independent “in name only”.
The contract between the two companies meant it was far simpler for FairWay if decisions were favourable towards ACC.
“It’s flawed in terms of its sole client being ACC and it’s beholden to that client, who represents one side of everything.”
Why no tender?
Usually, when a Crown entity is sold a tender process is initiated to ensure the best price is received and any cloud of conflict is removed.
But the FairWay sale was confirmed without a tender following “independent advice” on the available options being provided to the ACC and Finance Ministers.
The QC review followed a separate report and recommendation by the United Nations Committee on the Rights of Persons with Disabilities, which criticised the Government for a lack of consultation with people with injuries and disabilities.
Critics have noted that without a tender or consultation on the sale of FairWay, those people were again shut-out of having a say on an issue directly affecting them.
ACC Minister Michael Woodhouse said he had asked about the lack of a tender process and had received advice that it was deemed unnecessary and would have achieved nothing.
FairWay was a small organisation with high risks to its revenue because it relied on contracts with ACC and the Ministry of Justice, plus the company’s leadership team had approached with an offer to buy.
“My concern was to ensure the price was right on behalf of the taxpayer and the risks were managed in an efficient way and Treasury gave us the advice that said ‘yep, we could go out to tender, it could take a lot longer, it would be more costly and we’d be no better off’ so the Minister of Finance and I were satisfied that that question had been answered quite clearly.”
Regarding concerns about the company’s independence, Woodhouse said the Government had listened to concerns about ownership and that was why it was no longer owned by the Crown.
“If you were to suggest FairWay might make a different decision because otherwise ACC could get grumpy with them has no basis, there’s really no substance to suggesting that’s the case.”
When asked if moving ACC disputes within the judiciary would alleviate perceived concerns about independence he said it would not, as the judiciary were “not volunteers”.
There was always going to be a tension in the system and if it moved back under the umbrella of the Crown it would again raise the initial complaint of Government ownership.
True independence was impossible to achieve “unless you want people to be not paid for their services," Woodhouse said.
"The judiciary is no different in that sense, they’re being paid for their services as well.”
FairWay & ACC respond
Following the QC review, FairWay chief executive Greg Pollock resigned from his position.
He was replaced on an acting basis by Rhys West, who had his role confirmed permanently following the sale.
He told Newsroom that questions about the independence of the company had centred around its ownership by the Crown and they had been answered by the sale to staff, who took their reputation seriously.
“For our ACC work, the change supports the changes recommended by Miriam Dean in an independent review...and reinforces its independence.
“There’s not an employee within FairWay that has KPIs in relation to their decisions, that’s a really, really important thing to understand. The KPIs we have are about ensuring that when people want to use the service they can access the service.”
Staff did not own individual shares in FairWay, West said. Instead, they had the opportunity to become involved in a profit share arrangement with the Trust that had purchased the company through debt.
How much they were eligible for was determined by an employee’s remuneration, tenure, and performance rating.
Regarding the phone transcript, West said he could not comment as he had not had enough time to consider it.
In a statement, ACC media spokesman Chris Ritchie said FairWay was viewed as an independent company that provided an independent service.
Regarding the phone transcript, ACC expected staff to be professional at all times and would be “very disappointed” to hear reports of staff not meeting that standard.