BROSNAHAN v THE CHIEF EXECUTIVE OF THE MINISTRY OF SOCIAL DEVELOPMENT [2013] NZHC 2618

BROSNAHAN v THE CHIEF EXECUTIVE OF THE MINISTRY OF SOCIAL DEVELOPMENT [2013] NZHC 2618 [9 October 2013]IN THE HIGH COURT OF NEW ZEALANDCHRISTCHURCH REGISTRYCIV 2013-485-426[2013] NZHC 2618BETWEEN BARRY NEAL BROSNAHANAppellantAND THE CHIEF EXECUTIVE OF THEMINISTRY OF SOCIALDEVELOPMENTRespondentHearing: 19 August 2013Counsel: S Boele for AppellantM F Clark for RespondentJudgment: 9 October 2013JUDGMENT OF THE HON JUSTICE KÓS[1] Mrs Brosnahan lived and died in poverty. Following her death, four weeks'New Zealand superannuation and disability allowance was paid to her bank account by the Ministry of Social Development. It went there, rather than to the husband who survived her. Mr Brosnahan lives in a rest home. He then applied to the Ministry for a funeral grant.1 But the practical effect of the benefit being paid to hiswife's estate was to deny any entitlement to the grant.[2] In this appeal from a decision of the Social Security Appeal Authority, Mr Brosnahan contends that the benefit payment should not be treated as part of hiswife's estate. It should, instead, have been paid to him. If that is correct, he wouldalso have been entitled to the funeral grant.[3] The essential question in this appeal is: to whom should the terminal benefit have been paid?1 Provided for in s 61DB of the Social Security Act 1964.Background[4] On 21 August 2011, Mrs Blanche Brosnahan died. She was 68 years old. She had no assets of any value. Her bank account had nothing in it. She lived in a Housing Corporation flat, on superannuation and a disability allowance. I regret that apart from these stark facts, I know nothing else about her life.[5] Her husband, Mr Barry Brosnahan, lives in a retirement home. He is physically and mentally incapacitated. He receives a full subsidy for this accommodation. He, too, has no assets of any value.[6] Both Mr and Mrs Brosnahan had given enduring powers of attorney to Fr Jim Consedine. He had befriended the Brosnahans. Fr Consedine is active in a welfare organisation known as The Catholic Worker. It is a charitable trust.[7] A terminal benefit payment of four weeks' New Zealand superannuation and disability allowance, $1,596, was paid into Mrs Brosnahan's bank account after herdeath. Paid, in effect, to her estate.[8] Mrs Brosnahan's funeral cost $1,438. On 30 August 2011, Fr Consedine applied, on Mr Brosnahan's behalf, for a funeral grant under s 61DB of the SocialSecurity Act 1964.2 That provides assistance where the estate of the deceased cannot meet reasonable funeral costs.3 The Ministry assessed the reasonable costs of her funeral to be $1,062. That figure is unchallenged, albeit the actual cost of the funeralwas $1,438. The Ministry then assessed Mrs Brosnahan's estate at $1,360, being the amount of the terminal benefit payment less certain payments on account of rent.The application for a funeral grant was declined. That was because Mrs Brosnahan'sestate was capable of meeting reasonable funeral costs.[9] Fr Consedine sought a review of that decision. As his application put it:The deceased was a pauper, owned nothing substantial, was recipient of amarried person's superannuation. Her spouse is in a rest home, mentally andphysically incapacitated. A small group of us befriended them 25 years ago,2 Herein, the Act.3 The precise conditions are explained at [19] to [26] below.and have journeyed with them through their various illnesses. We believe they should qualify for a funeral grant. If not them, who?[10] The Benefits Review Committee and the Social Security Appeal Authorityboth upheld the Ministry's decision.Statutory frameworkStatutory purpose[11] The purpose of the Act is, inter alia, "to enable, in certain circumstances, the provision of financial support to people to help alleviate hardship". Such support is provided to people taking into account "[t]hat where appropriate they should use theresources available to them before seeking financial support under this Act".4Terminal benefits[12] The terminal benefit paid on the death of a social security beneficiary is provided for in s 80BD. Ordinarily, entitlement to benefits ends on death.5 But s 80BD(4) contains an exception where a superannuitant leaves a spouse or partner, or a child. In that case, the benefit ends four weeks after death. Consideration will later be given to why that additional assurance is given. Plainly it makes no difference to the deceased.[13] Section 80BD(4) simply provides:Ending of benefits...(4) If a person referred to in subsection (3) dies, the benefit ends 4 weeks following the death if—(a) the person leaves a spouse or partner or a child; and(b) the spouse or partner or child are not entitled to a lump sum payment under section 56 of the Accident Rehabilitation and Compensation Insurance Act 1992 or section 444 of the4 Section 1A(b) and (c).5 The Ministry sets the final payment date: s 80BD(5).Accident Insurance Act 1998 or section 382 of the Accident Compensation Act 2001.[14] To whom is that terminal benefit to be paid? That is at the nub of this appeal. It is governed, in the first instance, by s 82(3) and (4) of the Act:Payment of benefits...(3) Except as otherwise provided in this Act, every instalment of a benefit shall be paid to or on account of the beneficiary personally:provided that for good cause the chief executive may, in the chief executive's discretion, direct that payment of the whole or any part of an instalment, or any number of instalments, be paid—(a) to or on account of some other person authorised by the beneficiary or, in the case of a beneficiary who lacks sufficient capacity in law, to any person appointed by the chief executive for the purpose of receiving it; or(b) with or without the consent of the beneficiary—(i) to any person in payment of the beneficiary's lawful debts or other liabilities:(ii) to, or for the benefit of, the spouse or partner of the beneficiary or any dependent child or children of the beneficiary.(4) Except as otherwise provided in this Act, every instalment of benefit shall be paid in a manner and at the place determined by the chief executive from time to time, and no appeal under this Act shall lie against that determination.[15] On the face of things, therefore, a benefit is paid to the beneficiary's account except where, "for good cause" the chief executive6 directs (in his or her discretion) that it is to be paid otherwise, including to the spouse, partner or dependent children of the beneficiary.[16] As a matter of policy the Ministry has for some years been paying theterminal benefit to the beneficiary's estate. Its current policy guidelines provide:6 The decision making power is delegated. I will refer in the balance of this judgment to the"Ministry" as the decision maker.If the deceased person was receiving a benefit and terminal benefit was paid,the continued payment will form part of the deceased person's assessableestate.[17] Consideration also needs to be given to reg 6 of the Social Security (Monetary Benefits) Regulations 2007. It provides:Payment on death of beneficiary(1) This subclause applies if—(a) on the death of a beneficiary, an amount of the benefit concerned (which may include an instalment already due that has not been paid and remains payable) is unpaid; and(b) the amount is not disposed of in accordance with section 80BD(4) of the Act to or for the benefit of the surviving spouse or partner, or a dependent child or children, of the beneficiary.(2) If subclause (1) applies,—(a) if probate of the beneficiary's will has been granted, or letters of administration of his or her estate have been issued, the amount must be paid to his or her executor or administrator:(b) in any other case, the amount must be paid in accordance with section 65(2) and (3) of the Administration Act 1969.[18] How these payment provisions work is a subject I will return to.7Funeral grants[19] Funeral grants are provided for in ss 61DB and 61DC of the Act. Entitlement to such a grant is not restricted to persons in receipt of a social security benefit. Section 61DB, the relevant provision here, reads:Payment of funeral grants where there is a surviving spouse or partner or childrenIf a person, other than a child, dies and the deceased person is survived by—(a) a spouse or partner; or(b) a child or children whom he or she is liable in law to maintain; or7 At [31].(c) any other dependent child or dependent children (whether dependent on the deceased or any other person) aged 16 years or 17 years of whom the deceased person was the parent—the chief executive may, in the chief executive's discretion, pay a funeral grant not exceeding $1,971.37 to meet the deceased person's reasonable funeral expenses if—(d) those funeral expenses cannot be paid from the aggregate of—(i) the deceased's assessable estate before the payment of any other debts; and(ii) the assets of any spouse or partner who survives the deceased, other than non-assessable assets, in excess of [$1,708]; and(e) the annual income of any spouse or partner who survives the deceased is less than [$40,612].[20] Six things need to be noted about this provision.[21] First, the exclusion in s 61DB(d) relates to the deceased's assessable estate "before the payment of any other debts", along with the assets of any spouse orpartner who survives the deceased. It does not also take into account the assets of a dependent child provided for in s 61DB(b) and (c).[22] Secondly, "assessable estate" means the whole estate of the deceased, apartfrom any asset which the Ministry considers impracticable to realise, "non- assessable assets" and administration expenses.[23] Thirdly, "non-assessable assets" relate essentially to the family residence, household articles, family cars and boats, and Māori land.8[24] Fourthly, if the terminal benefit is paid instead to the surviving spouse it may be capable of being taken into account under s 61DB(d)(ii) to defeat or diminish entitlement to a grant. That may depend on the required time at which the spouse orpartner's assets are assessed, under s 61DB(d). On that the Act unhappily is silent. However in this case it makes no difference because Mr Brosnahan had no monetary assets whatever. Even including the terminal benefit, if paid to him, his assets would not exceed $1,708.8 "Assessable estate" and "non-assessable assets" are defined in s 61D(1).[25] Fifthly, the funeral grant payable under s 61DB is payable to a wide range ofpersons, at the Ministry's discretion. They include the surviving spouse, partner or children, the deceased's estate, any person who has met the funeral expenses, or thefuneral director.9[26] Finally, the Ministry has provided to the Court statistics on the total number of funeral grant payments made in the twelve month period July 2011 to June 2012. Some 5,504 funeral grants were paid. Of that number, 1,659 were paid to a surviving spouse. It is not clear how many of these cases were ones where terminalbenefits had also been paid, as the grant is available to all. On the Ministry's case, such benefits would always be part of the "deceased's" assessable estate" for thepurposes of s 61DB(d)(i).10 The surviving spouse or partner would need to have few assessable assets (for the purposes of s 61DB(d)(ii)) for a funeral grant to be payable in such a case.Decision appealed[27] The Authority held that the payment of the terminal benefit into Mrs Brosnahan's account formed part of the "deceased's assessable estate" for thepurposes of s 61DB(d)(i). "Estate" was a broad concept, and "assessable estate" didnot exclude this payment. The latter included any money which her estate was entitled to receive following her death, including the terminal benefit payment. Itwas unnecessary to add the words "at the date of death" to make sense of "assessable estate", or of s 61DB.[28] The Authority concluded:We do not accept the appellant's claim that the Ministry's interpretation is contrary to Parliament's intention in making the terminal payment providedfor in s 80BD(4). We think it reasonable to infer that the terminal payment is made to assist with any debts owed by the deceased including sharedexpenses and expenses arising from the beneficiary's death. The availabilityof this payment to assist with funeral expenses in fact provides some financial relief to a surviving spouse or children in that it helps to meet these costs. The purpose of the Social Security Act 1964 is to provide financial9 Section 61DE(1).10 Assuming payment had been made to the deceased's account.support to help alleviate hardship. We do not think the intention is to provide money to be inherited by a surviving spouse.Issue for determination[29] The Authority posed two questions by way of case stated. They are:(a) Did the Authority err in law by determining that the terminal benefitpayment formed part of the deceased's assessable estate for thepurpose of determining entitlement to a funeral grant under s 61DB of the Act?(b) Did the Authority err in law in concluding that a terminal benefit payment under s 80BD(4) of the Act was not intended to provide money to be inherited by the surviving spouse.[30] In the end however, counsel agreed at the hearing that the real question underlying those questions was:(c) Did the Act require the terminal benefit to be paid direct to Mr Brosnahan?It is that question (c) I will address here.Discussion[31] The proper construction of the Ministry's payment obligation can be analysedin the context of nine points.[32] First, in Accident Compensation Corporation v Mitchell Richardson J saidthat the Accident Compensation Act 1982 was to be given a "generous unniggardly interpretation".11 That reflected the then-philosophy of comprehensive cover under that social policy legislation, and the corresponding exclusion of personal injury11 Accident Compensation Corporation v Mitchell [1992] 2 NZLR 436 (CA) at 438.litigation. That opinion was approved by other members of the Court of Appeal inHarrild v Director of Proceedings.12[33] I do not think that interpretative approach should be confined to that Act, as if it were sui generis. In my respectful opinion it is applicable to social policy legislation generally. The reason for that is obvious. In a context such as the present Act, Parliament is dealing with the expectations of the poor and disadvantaged.13Small individual sums of money may have very significant personal consequences. Where those expectations are the fair and reasonable product of statutory language, and are consistent with the overall statutory purpose, they are not, I think, to be read down except by language of the clearest kind. Lines of exclusion in a welfare context need to be drawn clearly.[34] Second, it is essential at the outset to ask and answer the question: for whose benefit is the guaranteed four week terminal benefit actually paid?[35] Not, clearly, the deceased. Nor the deceased's creditors. No such guaranteeis given where the deceased has creditors, but no spouse, partner or child. Is it too much to infer that the reason that Parliament provided the four week guarantee of terminal benefit in s 80BD(4) only where the deceased beneficiary leaves a spouse, partner or child, was that it did so in order to help that spouse, partner or child?[36] The guaranteed terminal benefit is surely designed to allow the beneficiary'sfamily to adjust from reliance on the assistance given by that benefit, to a situation where they must now provide for themselves. The loss of the benefit will have an economic impact on survivors. It may have been paying a significant part of the fixed (or largely fixed) costs of that family unit: the cost of housing, or the cost of power and heating, for instance. And it may also have been paying part of the variable costs – such as food and other daily living expenses – of the spouse, partner and children living with the deceased. The loss of that economic contribution will take time to adjust to. Probably more than four weeks, but that is the period the Act provides.12 Harrild v Director of Proceedings [2003] NZLR 289 (CA) at [19], [39], [80] and [130].13 In this case, but for the commendable intervention of Father Consedine and Community Law Canterbury, these issues would not have been ventilated.[37] In s 80BD(4) Parliament has drawn a clear distinction between beneficiaries with immediate family at the time of death, and those without. Non-immediate family members gain no such assistance, presumably because they are less likely to be reliant on that benefit. The purpose of the distinction, and the provision, must have been to assist the spouse, partner and children. Indeed Ms Clark quite fairly acknowledged as much in her submissions:The respondent submits that the purpose of the payment is to provide financial relief to the immediate family of a beneficiary in the time followingthe beneficiary's death. This is clear from the Act, given that no similarprovision is made for those beneficiaries who die and do not leave either a spouse or partner, or surviving children.[38] It is not about the provision of an inheritance, as the Authority put it.14Rather it is a brief continuation of benefit to tide the immediate family over financially. Significantly, there is no means test involved in the prolonged terminal benefit payment. That is in contrast to payment of the funeral grant, which is means- tested. Nor are Mr Brosnahan's exceptional personal circumstances material to auniversal construction of s 80BD(4).[39] In short, the purpose of the four week guarantee of terminal benefit in s 80BD(4) is to provide immediate financial aid to the deceased's immediate family.[40] Third, s 82(3) provides that in the payment of benefits in the ordinary course, the Ministry has a relatively broad discretion to direct that payment of the whole or any part of a benefit instalment be paid otherwise than to the beneficiary – includingto "the spouse or partner of the beneficiary or any dependent child or children of the beneficiary".15 It may do that where there is "good cause" to do so. One might havethought that one such good cause was the death of the beneficiary. And then to pay the terminal benefit to the family, for whose aid it is provided, rather than direct to the ordinary bank account (and therefore the estate) of the beneficiary. Here, however, the Ministry has taken the latter approach as a matter of policy. That decision is the genesis of this proceeding.14 See at [28] above.15 Section 82(3)(b)(ii).[41] Fourth, reg 6 is expressly concerned with payment of unpaid benefit on the death of a beneficiary. Regulation 6(1)(a) deals with unpaid benefit "on the death of the beneficiary". It is clear ("which may include") that its focus is both backwardand forward. Terminal benefit is an entitlement arising on death. It is plainly within the scope of reg 6(1)(a). The question here is whether reg 6 requires that terminal benefit to be paid to the immediate family members.[42] Fifth, where (as here) reg 6 applies, there are four options that play out progressively:(a) The first is that the unpaid amount is "disposed of in accordance withsection 80BD(4) to or for the benefit of the surviving spouse or partner, or a dependent child or children, of the beneficiary". Thatcourse plainly is permitted by reg 6(1)(b). But more than that, the structure of reg 6 suggests that, in the normal course, the terminal payment would be disposed of in accordance with s 80BD(4) of the Act. So does the overriding purpose of the terminal benefit payment, discussed already. What is the point of providing financial assistance to immediate family following the beneficiary's death if the familydoes not actually receive the money? There is no means test, as has been noted.(b) The second is that where (a) has not occurred, but probate has been granted (or letters of administration have been issued), the money is to be paid to the executor (or administrator).16(c) The third is where neither (a) nor (b) applies, then the money may be paid direct to the widow or widower,17 provided they have applied for (or agreed to receive) payment.1816 Regulation 6(2)(a).17 Or other persons such as a partner or beneficiary: the full list is in s 65(2) of the Administration Act 1969.18 That is the combined effect of reg 6(2)(b) and s 65(2) of the Administration Act 1969. Theamount may not exceed $15,000 and payment is subject to the proviso: "... no payment shall be made to any person unless he applies for or consents to receive that payment."(d) The fourth is in any other case, and then the money may be used to pay the funeral expenses of the deceased.19[43] Sixth, reg 6 governs the question of to whom terminal benefit must be paid on the death of a beneficiary. Regulation 6(2) is cast in mandatory terms. To that extent it supplants the discretion otherwise vested in the Ministry in s 82(3) as to payment. Death and reg 6, arm in arm, require payment of terminal benefit to be made in accordance with the provisions of the latter. The proviso in s 82(3) is engaged. The Ministry no longer has authority simply to pay the benefit sum intothe deceased's bank account.[44] Seventh, of the four payment options identified above,20 the first is the primary option. Given the conclusion reached earlier that the purpose of the terminal benefit payment is to assist the deceased's family,21 the Ministry does not have free choice among the four options. It would not be consistent withParliament's intent for the Ministry to avoid making payment of terminal benefit to Mr Brosnahan. Notably, the second option – contingent on probate or administration– will be a protracted event. Probate for a simple will typically takes six to eight weeks after death, and letters of administration a little longer. The third option in substance recreates the first (but with other potential applicants for payment). The second, third and fourth options are very much default positions if the first for some reason has not been engaged. For instance, because there is no spouse or partner, and any child is no longer dependent.22 Or because there are difficulties of identification, communication or disagreement.[45] Eighth, the Ministry's case would preserve a discretion under s 82 to decidewhether to pay the terminal benefit to the surviving spouse or partner or children, or not to do so. If it chooses not to do so, the terminal benefit simply forms part of thedeceased's estate. It is likely then to disentitle that immediate family to a funeralgrant. That is because the means test in s 61DB(d)(i) values the estate before debts.19 That being the effect of reg 6(2)(b) and s 65(3) of the Administration Act 1969.20 At [42].21 See [34] to [39] above.22 Section 80BD(4) does not require the child to be dependent, but reg 6(1)(b) – the first of the four options - does. A non-dependent child would need to engage the third option.Essentially, as this case demonstrates, the net gain to the estate from the terminal benefit is largely consumed by the funeral costs.23 The surviving spouse, partner and children are not assisted directly in any way, contrary to the inferred purpose of s 80BD(4).[46] In contrast, the estate of a single beneficiary (without children), who was in the same parlous financial position as Mrs Brosnahan, would (1) not be entitled to terminal benefit, but (2) would be entitled to a funeral grant under s 61DC. On theMinistry's interpretation, the estates of the single person and the person survived byothers are left in similar financial positions upon death. The immediate family of the latter receives no financial assistance. What then was the point of the distinction Parliament so clearly drew in enacting s 80BD(4)?[47] Finally, and for completeness, a funeral grant may of course yet be deniedbecause of the effect of s 61DB(d)(ii): the surviving spouse or partner's assetsexceed $1,708. In this case Mr Brosnahan's did not, and that provision is notengaged. A question not resolved in this decision, therefore, is whether the terminal benefit paid properly to the spouse is then taken into account in the means test in s 61DB(d)(ii). That is a timing question, and does not arise on the facts here.Conclusions[48] It is common ground that the purpose of the four week terminal benefit in s 80BD(4) is to provide immediate financial assistance to the immediate family of a deceased beneficiary. It tides the family over while it adjusts to the loss of economic assistance the benefit provided.[49] The policy adopted by the Ministry of paying that benefit to the estate, rather than the family, is inconsistent with both s 80DB(4) of the Act and reg 6 of the Social Security (Monetary Benefits) Regulations 2007. These, I find, require payment to the surviving spouse, partner and children in accordance with s 82(3)(b)(ii).23 Funeral expenses are the second call on estate assets, after administration expenses but before other debts: Administration Act 1969, s 31; Insolvency Act 2006, s 393.[50] The practical effect of that policy has been threefold. First, to deny immediate financial assistance to the family. Secondly, to direct that benefit to the payment of funeral costs (because the estate is then funded to meet such costs). Thirdly, to displace any entitlement to a funeral grant, 24 thus reinforcing the second consequence.[51] The Ministry's payment policy was unlawful.[52] The answer to the question posed at [30] – "Did the Act require the terminal benefit to be paid direct to Mr Brosnahan?" – is "Yes".[53] The terminal benefit should have been paid to Mr Brosnahan. Not to Mrs Brosnahan's estate.Result[54] The appeal is allowed.[55] If costs are in issue, memoranda may be filed.[56] I am grateful to Ms Boele, Ms Clark and to Fr Consedine, for their assistance at the hearing of this appeal.Stephen Kós JSolicitors:Community Law Canterbury, Christchurch, for AppellantCrown Law, Wellington, for Respondent24 Because of the effect of s 61DB(d)(i).