MANU GOPALJI CHHIMA AND ANOR V CHIEF EXECUTIVE, MINISTRY OF SOCIAL DEVELOPMENT CA CA224/06

MANU GOPALJI CHHIMA AND ANOR V CHIEF EXECUTIVE, MINISTRY OF SOCIAL DEVELOPMENT CA CA224/06 12 December 2006IN THE COURT OF APPEAL OF NEW ZEALAND CA224/06BETWEEN MANU GOPALJI CHHIMA First Applicant AND SAVITA MANU CHHIMA Second Applicant AND CHIEF EXECUTIVE, MINISTRY OF SOCIAL DEVELOPMENT Respondent Hearing: 4 December 2006 Court: O'Regan, Robertson and Ellen France JJ Counsel: A J McGurk for First and Second Applicants U R Jagose and M L Campbell for Respondent Judgment: 12 December 2006 at 9.30 amJUDGMENT OF THE COURT A Special leave declined. B Costs of $1,500 together with usual disbursements awarded to respondent.____________________________________________________________________REASONS OF THE COURT(Given by Robertson J)Introduction[1] In September 2000, Mr Chhima applied for and was granted a transitional retirement benefit. In the course of making the application he made disclosures about his financial position. There was a dialogue about these details between the parties and in 2002 the respondent determined that Mr Chhima's entitlement to a benefit would be reassessed on the basis that he had a notional income of $15,502. The notional income was calculated to represent a return of 4.6% on $337,000 being the government valuation of land the applicants owned. [2] Mr Chhima challenged the determination, but the decision of the Chief Executive was upheld in an appeal heard by the Social Security Appeal Authority (the Authority) in 2003. [3] Later that year, Mrs Chhima appealed to the Authority against a decision of the Chief Executive to charge a notional income against her entitlement to unemployment benefit on the same basis. Her appeal was also dismissed. [4] The Authority stated a case to the High Court in August 2004 in respect of each applicant. Each contained a number of variations on the theme, but in substance each came back to whether the respondent was entitled to have regard to the provisions of s 74(1)(d) of the Social Security Act 1964 (the Act) in making determinations in respect of Mr and Mrs Chhima. This permits the respondent to refuse or reduce a benefit where applicants have directly or indirectly deprived themselves of income or property. [5] The cases were heard together in the High Court by Frater J and in a reserved decision of 24 February 2006 she answered all questions in a way contrary to the position of Mr and Mrs Chhima. This had the effect of upholding the respondent's decisions relating to them both. [6] In June 2006 they applied to the High Court for leave to appeal to this Court on the basis 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 submission.[7] This was opposed on the basis that the applicants did not identify an area of law capable of bona fide and serious argument, that the Chief Executive's decisions had been reviewed by three Tribunals and a further appeal was not justified, there was no question of law that was seriously arguable and the issue was not of such general or public importance that it should be submitted to this Court. [8] Frater J concluded that what was involved was a criticism of the application of the law to facts and therefore the requirements for granting leave did not exist. She held that, even if the case had crossed the first threshold, it did not raise an issue of sufficient general or public importance to warrant a third tier of appeal. [9] This application for special leave is advanced essentially on the same general basis that the High Court erred in law by holding that s 74(1)(d) of the Act could be used by the respondent in the circumstances of these cases.Background[10] Mr and Mrs Chhima owned about 13 acres of land at Takanini which they acquired in the late 1980's. Mr and Mrs Chhima do not have a residence on this property. They worked the land as a market garden until 1999 when Mr Chhima had an accident and could no longer work. He thereafter received an ACC benefit. [11] In June 1999 the land was put on the market at what was alleged to be an unrealistic asking price. Mr Chhima asked the real estate agent to try and lease the land, but nothing eventuated. Mr and Mrs Chhima allowed a neighbouring farmer to graze cattle on the land and grow maize. No payment was received for this. Accordingly, during the period from 1999 until 2004 (when the property was eventually sold) no income was generated from the land.[12] The Chief Executive eventually determined that in these factual circumstances, when Mr and Mrs Chhima were each applying for benefits, s 74(1)(d) of the Act applied. It provides, inasmuch as is relevant:74 Limitation in certain other cases(1) the chief executive may, in the chief executive's decision, refuse to grant any benefit or may terminate or reduce any benefit already granted or may grant a benefit at a reduced rate in any case where the chief executive is satisfied - (d) That 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. [13] The benefits in question are not asset-tested benefits. They are income-tested only. A key factor influencing the Chief Executive was the fact that this business asset was not being used to generate income in some form. [14] Frater J interpreted the word "deprive" in s 74(1)(d) as applying not only in an active sense but in a passive sense. In her assessment, a person can divest themselves of income by not taking an opportunity to do something which is reasonably available. [15] Frater J determined that by not actively seeking financial gain from the use of their business asset, Mr and Mrs Chhima were depriving themselves of potential income that could flow from offering to sell the land at a reasonable price or leasing the land in return for rental. She stated at [68]:Each time [Mr and Mrs Chhima] rejected an offer to purchase, or failed to pursue an opportunity to lease the property, or when they allowed the neighbour to use the land for free, they made a conscious and deliberate decision to forego income.Discussion[16] There is no argument as to the applicable test for leave to appeal to the Court of Appeal: Waller v Hider [1998] 1 NZLR 412 (CA), Snee v Snee [2000] NZFLR120 (CA). Leave may only be granted where there is a bona fide question of law, which by reason of general or public importance (or any other reason) ought to be heard by this Court. [17] In our view s 74(1)(d) is clear and unambiguous. The Chief Executive has a discretion to reduce or refuse a benefit where an applicant has directly or indirectly deprived themselves of income or property (where such benefits are income or asset tested). Mr and Mrs Chhima had owned land for a substantial period of time and used it as a business asset. When they could no longer exploit it themselves, they did not avail themselves of other opportunities readily available to achieve a return from the property. That was held to be a deprivation which permitted the respondent to exercise a discretion. [18] In Blackledge v Social Security Commission HC AK CP81/87 17 February 1992 Tompkins J held at [38] that there must be a deliberate conscious act, in that it is not enough if the deprivation arises by accident or due to circumstances beyond the applicant's control. [19] Subsequently Gendall J in Keenan v Director-General of Social Welfare HC AK APS24-SW00 9 June 2000 held at [12]:Whilst counsel for the appellant says the facts of Blackledge are materially different to the factual circumstances of this case, and therefore the authority was wrong in applying that case, I do not agree. The principle to be derived from Blackledge is equally applicable to the situation of the appellant.Blackledge states that which is obvious, namely there has to be a deliberate relinquishing of property or income through the choice exercised by the applicant. But the purpose or motive for such actions (whether to create an eligibility for a benefit or otherwise) is something different. It is not discernible from the legislation or its purpose that a person should have the specific motive of obtaining a benefit, when deliberately relinquishing property or income before the subsection applies.[20] Mr McGurk's principal argument was that the decision of the High Court meant an applicant was required to sell his or her property to avoid the operation of s 74(1)(d). That was apparent, he said, from the fact that the notional income was calculated on the basis of a percentage of return on the government valuation of the land. Mr McGurk said that the decision of the High Court effectively extended the operation of s 74(1)(d) to require applicants to account for assets in circumstanceswhere entitlement to benefits was not subject to asset testing. He asserted, therefore, that Frater J erred in law. We are not persuaded that anything in the circumstances of this case involves a recasting of the law in respect of an entitlement to non-asset tested benefits. A formula had to be used to calculate the notional income and nothing more need be read into that choice. Ms Jagose for the respondent accepted that the Chief Executive's concern was the deprivation of income. He was not requiring a sale, but an ongoing sensible utilisation of the property. Section 74(1)(d) prevents people from depriving themselves of an income stream which means they can then qualify for a benefit. [21] Mr McGurk submitted the circumstances in Keenan and Blackledge were different to the situation in the present case as there was no deliberate act by Mr and Mrs Chhima that resulted in them qualifying for a benefit. We do not agree that that is necessarily so. There can be a depriving by omission, indifference or inertia which is a deliberate choice being exercised. [22] We are satisfied that there is not an error of law in this case. The applicants are effectively challenging the application of the law to the facts. The decision of the respondent was clearly an available exercise of discretion upon a proper application of existing legal principles in a somewhat unusual factual situation.Conclusion[23] The threshold in s 144 of the Summary Proceedings Act is not met and the application for leave is declined. The respondent is entitled to costs of $1,500 together with usual disbursements.Solicitors: Otene & Ellis, Auckland, for Applicants Crown Law Office, Wellington