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High Court of New Zealand Decisions |
IN THE HIGH COURT OF NEW ZEALAND
AUCKLAND REGISTRY
CIV-2004-485-1761
CIV-2004-485-1762
UNDER
the Social Security Act 1964
IN THE MATTER OF appeals from decisions of the Social
Security Appeal Authority under s 12Q of
the
Social Security Act 1964
BETWEEN MANU GOPALJI CHHIMA AND
SAVITA MANU CHHIMA
Appellants
AND
THE CHIEF EXECUTIVE OF THE
DEPARTMENT OF WORK AND
INCOME NEW ZEALAND
Respondent
Hearing: 22 June 2006
Appearances: A J McGurk for Appellants
M L Campbell for Respondent
Judgment: 22 September 2006
JUDGMENT OF FRATER J
This judgment was delivered by Justice Frater
on 22 September 2006 at 9.15 am, pursuant to
r 540(4) of the High Court Rules
Registrar/Deputy Registrar
Date:
Counsel: A J McGurk P O Box 9491 Te Aro Wellington
for the Appellants
Crown Law Office P O Box 2828 Wellington for the Respondent
Solicitors: Otene and Ellise P O
Box 13138 Onehunga for the Appellants
CHHIMA V WINZ HC AK CIV-2004-485-1761 22 September 2006
[1] Mr and Mrs Chhima seek leave
to appeal to the Court of Appeal against my
judgment delivered on 24 February 2006 concerning the interpretation of s 74(1)(d)
of
the Social Security Act 1964.
[2] The stated grounds of appeal are that:
The determination of the High Court raises
a question of law as to whether
under s 74(1)(d) of the Act the appellants' circumstances meant that they
deprived
themselves of income, and that by reason of its general public
importance ought to be submitted to the Court of Appeal for
decision.
[3] The respondent opposes the application on three grounds:
i) The appellants have failed to
identify an area of law capable of
bona fide and serious argument;
ii) The respondent's
decision has already been reviewed by three
Tribunals and a further appeal is not justified;
iii) Even if there is a question of law that is seriously arguable, the
issue is not of such general or
public importance, nor is there
any other reason, that it should be submitted to the Court of
Appeal.
The facts
[4] The appellants owned 13 acres of horticultural land at Takanini which they
worked as a market
garden until Mr Chhima suffered an accident. They placed it on
the market for sale in 1999 but it did not sell until January 2004.
In the meantime
they received no income from it. In September 2000 Mr Chhima was granted a
transitional retirement benefit. In January
2002 Work and Income New Zealand
reviewed his benefit entitlement to include an income charge calculated on the
interest that could
be earned for a 12 month term deposit on $337,000 the 2000
Government valuation of the land.
[5] Subsequently Mr Chhima was
granted National Superannuation at half the
married rate. As Mrs Chhima had been included in his previous benefit she then
applied
for an unemployment benefit. The Department adopted the same approach
to the calculation of her entitlement as they had previously
applied to Mr Chhima.
[6] Mr and Mrs Chhima separately appealed against these decisions, first to the
Benefits Review Committee, then to the Social Security Appeal Authority.
[7] The Authority
concluded that s 74(1)(d), which allows benefits to be reduced
or terminated where the applicant has directly or indirectly deprived
himself of any
income or property which results in his qualifying for that or any other benefit or an
increased rate of benefit was
satisfied in each case and that, accordingly, the
Department was right to calculate a notional income based on the Government
valuation
of the land and to adjust the appellants' benefit entitlements accordingly.
[8] Thereafter Mr and Mrs Chhima each appealed to
this Court by way of case
stated against the Authority's decision. The appeals have now been consolidated.
[9] My findings,
for present purposes, were that:
i) Because Mr Chhima is now receiving National Superannuation
which is not income tested and Mrs Chhima is no longer
entitled to any benefit, the property having
been sold and the
parties having subsequently separated, the outcome of the
appeals will
be of little practical benefit to them.
ii) Although previously decided cases concerning s 74(1)(d)
(Blackledge v Social Security Commission HC AK CP81/87 17
February 1992 and Keenan
v Director General of
Social Welfare HC AK AP 24-SW00 19 June 2000) had
involved
situations where the appellants had taken clearly
identifiable positive steps to divest themselves of their
assets
and orchestrate the situation which led to their reliance on the
State, s 74(1)(d)
includes acts of omission as well as
commission.
iii) The word "deprive" in s 74(1)(d) must apply in a
passive as
well as an active sense. A person can divest themselves of
income by not taking an opportunity to do something.
Acts of
omission will not necessarily be past events and can be
ongoing.
iv) Income is not only what a person
has but also what they may
receive in the future. Depriving oneself of income will usually
involve a failure to take
an opportunity to receive income.
v) The critical requirement in each case is that the act of
deprivation, whether
of commission or omission, is deliberate,
which is a matter of fact.
vi) The approach adopted by the Authority is consistent
with the
general approach to Social Welfare legislation of expecting
applicants to avail themselves of their own
resources before
turning to the State. It is not akin to applying an asset test
because the appellants were not being
required to sell their
land. They were required to obtain an income from it.
vii) The appellants made a deliberate decision
to put the property
on the market for sale and did so in a manner designed to
deprive them of the potential income
that could flow from
offering to sell at a reasonable price or leasing. Each time,
over the five year period involved,
that they rejected an offer
to purchase, failed to pursue an opportunity to lease the
property or when they allowed
a neighbour to use the land for
free, they made a conscious and deliberate decision to forego
income.
viii) Whether
there is a potential income is a question of fact in
each case. The answer will depend on the nature of the
income
and the asset from which it is derived. In a case such
as this, where the applicant had previously derived
an income
from a commercial asset it would be reasonable to expect that
they continue
to do so. A domestic asset will generally be in a
different category.
ix ) This is not a test case. While
the result of this decision
extends s 74(1)(d) into new territory, the floodgates have not
been irreversibly opened. The decision is specific to its own
facts.
The approach to leave applications
[10] The basis upon which leave to appeal to the Court of Appeal is granted is
well established. Section 12R of the Social Security
Act 1964 incorporates s 144 of
the Summary Proceedings Act 1957, which provides that this Court may grant leave
if it considers that
the appeal involves a question of law which:
... by reason of its general or public importance or for any other reason ought
to be submitted to the Court of Appeal for decision.
[11] Both counsel cited the Court of Appeal's decision in Waller v
Hider [1998] 1
NZLR 412 as enunciating the test to be applied in this case. In delivering the
judgment of the Court, Blanchard J said (at 413):
The
appeal must raise some question of law or fact capable of bona fide and
serious argument in a case involving some interest,
public or private, of
sufficient importance to outweigh the cost and delay of the further appeal ...
Upon a second
appeal this Court is not engaged in the general correction of
error. Its primary function is then to clarify the law and to
determine whether
it has been properly construed and applied by the Court below.
[12] However, although the Waller v Hider
test has been recognised as being
generally relevant to appeals under the Social Security Act: see Toetoe v Chief
Executive Officer,
Department of Work and Income New Zealand HC WN AP248/00
18 March 2002 Gendall J, it needs to be remembered that it concerned an
appeal
brought pursuant to s 67 of the Judicature Act where the right of appeal is not limited
specifically to questions of law.
Accordingly, as Cooper J noted in Prasad v
Chief Executive of the Ministry of Social Development (2004) 17 PRNZ 139, the
starting point in cases under the Social Security Act must always be the criteria in
s 144 and the manner in which that section
has been interpreted and applied by the
Courts.
[13] One such decision is R v Slater [1997] 1 NZLR 211 where the Court of
Appeal said (at 212):
Section 144 was not intended to provide a second tier of appeal from a
decision of the District Court in proceedings under the Summary
Proceedings Act. ... Neither the determination of what
comprises a question
of law, nor the question of whether that point of law raises a question of
general or public
importance, are to be diluted.
[14] The critical point of Slater is that there must be a clear question of law
involved in
the appeal. Leave will not be granted where the appellant merely seeks
to re-argue a question of fact.
[15] If the legislature
did not intend that s 144 be used to provide a second tier of
appeal, it is even less likely that it intended to provide a third
tier from departmental
decisions under the Social Security Act: Dennis v Chief Executive of the Department
of Work and Income HC
AK AP5-SW03 (PL) 17 April 2003, Chambers J.
What is the question of law?
[16] The onus is on the appellants to identify
the question or questions of law
arising in this case: Toetoe v Chief Executive Officer, Department of Work and
Income New Zealand.
The respondent submits that they have failed to do so.
[17] Mr McGurk's preference was to state the question broadly. However,
I agree
with Mr Campbell that the question posed in the notice of appeal:
Whether under s 74(1)(d) of the Act the appellants'
circumstances meant that
they deprived themselves of income;
is too vague and does not state an obvious question of law.
[18] Mr McGurk was more precise in his written submissions, saying:
Specifically leave is sought on the question
of whether s 74(1)(d) can apply
in a way that says an existing state of affairs or omission in isolation can in
fact
result in an applicant qualifying for a benefit or an increased rate of
benefit, the issue being whether or not an existing
state of affairs or an
omission in isolation can amount to the kind of deprivation envisaged by the
subsection. Put
simply, did the appellants deprive themselves of income for
the purposes of s 74(1)(d) of the Act?
[19] In response, Mr
Campbell suggested that the following formulation more
accurately expressed the appellant's concerns:
Whether owners of a
commercial asset from which income can realistically
be derived may be found to have deprived themselves of income by not
making use of that asset?
[20] While not necessarily agreeing with that formulation, Mr McGurk said that it
points to the
need for this matter to go to the Court of Appeal for guidance both as to
what constitutes a commercial asset and how to determine
whether a deprivation has
occurred which, he said, is precisely the point of the appeal the construction of
s 74(1)(d) and how
it should be applied.
[21] Mr McGurk's argument is that no deprivation has occurred in this case
because s 74(1)(d) envisages
an actual deprivation of income not merely a potential
deprivation.
[22] What he seems to be asking is:
Whether, within
the context of s 74(1)(d), deprivation can occur directly or
indirectly through passivity, i.e. through to failing to take
an opportunity to
avail oneself of a potential source of income.
[23] In his written submissions Mr McGurk also addressed
three other issues
which potentially raise questions of law although he expressed them as statements,
rather than questions:
i) The Act encourages applicants for main benefits to retain
assets not to relinquish
them;
ii) The principle that applicants for benefits must look to their
own resources
before turning to the State is a general principle
that cannot be used to override specific statutory provisions;
and
iii) The decision of the High Court extends the instances in which
s 74(1)(d) can apply beyond the respondent's operational
policy.
Does a seriously arguable question of law arise in this case?
[24] It is not sufficient simply
to ask the question/s. For leave to appeal to be
granted the question must pose a seriously arguable question of law.
[25] Ultimately,
Mr McGurk's concern seems to be whether there can be a
deprivation where there is a failure to earn income, as distinct from an active
disposal of income currently received.
[26] While he accepted my finding that a deliberate act was necessary to
constitute a
deprivation, he submitted that the acts which I identified placing the
property on the market, refusing offers to purchase, failing
to pursue opportunities to
lease and allowing a neighbour to use the land for free, did not themselves result in a
deprivation. Something
else was needed.
[27] In this case, he said, no income had been relinquished because the property
had not been sold and it was
not possible to predict how the appellant would have
used the sale proceeds if it had. They could have used them all in a way, e.g.
by
spending them on overseas travel or in the purchase of vehicles, which would not
have resulted in a deprivation because no income
would have been produced. There
is no duty on applicants to deal with their property in a particular way in this case,
by putting
it on the market in the first place and, if it sold, to use the resulting funds
to produce income.
[28] However, Mr McGurk's
arguments ignore the fact that the Chhima's property
was previously earning income. In my decision I was careful to emphasise that
passivity alone would not constitute a deprivation. To be relevant an omission or
failure to act needs to be as the result of a
deliberate and conscious decision.
[29] Effectively what the appellants criticise is my application of the law to the
facts,
i.e. whether, in all the circumstances, there was sufficient deliberateness to
amount to a deprivation. Accordingly, I do not believe
they can satisfy the first
requirement for granting leave.
Issue of general or public importance
[30] However, even if I accept
the question of law as formulated, I am not
persuaded that it raises an issue of sufficient general or public importance to warrant
a third tier of appeal.
[31] The appellants' view throughout has been that this is a test case and that the
finding that I ultimately
reached would constitute a radical extension of s 74(1)(d),
which would have widespread consequences for other benefit recipients
who may,
similarly, be passively failing to capitalise assets in order to realise potential sources
of income. In this respect, the
appellants suggested that this could effectively result
in an "asset stripping" regime, whereby benefit recipients were forced, for
example,
to sell or downsize their family home in order to extract possible income.
[32] In support of this argument, at the
hearing of the present application
Mr McGurk produced statistics about the number of people currently on benefits, as
an indication
of those who could potentially be affected by this decision.
[33] However, as noted above, my substantive decision was based
upon the
unique facts of this case where there was a commercial asset that had previously
been used to generate income and a deliberate
course of action by the appellants not
to avail themselves of the potential income from that source. I believe the decision
has limited
general application.
[34] As noted in [7] i) above, it is also of limited practical significance for the
parties themselves
as they received the benefits at the reduced rate for relatively
short periods and neither of them is currently receiving an income
tested benefit.
[35] In R v Secretary of State for the Home Department, ex parte Salem [1999] UKHL 8; [1999] 2
All ER 42 Lord Slim, delivering the judgment of the House of Lords said (at 47):
The discretion to hear disputes, even in the area
of public law, must,
however, be exercised with caution and appeals which are academic between
the parties should
not be heard unless there is a good reason in the public
interest for doing so, as for example (but only by way of example)
when a
discreet point of statutory construction arises which does not involve
detailed consideration of facts and
where a large number of similar cases
exist or are anticipated so that the issue will most likely need to be resolved
in the near future.
[36] While I acknowledge that in the Social Security context these factors may be
of less significance
(see Prasad) it is not sufficient simply to say that the case
concerns interpretation of a statute and therefore may affect other
people. More is
required. The necessary evidence has not been produced in this case.
Result
[37] For the foregoing reasons,
leave to appeal is declined.
M A Frater J
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