CHIEF EXECUTIVE OF THE MINISTRY OF SOCIAL DEVELOPMENT v BROADBENT [2019] NZCA 201

CHIEF EXECUTIVE OF THE MINISTRY OF SOCIAL DEVELOPMENT v BROADBENT [2019] NZCA 201[31 May 2019]IN THE COURT OF APPEAL OF NEW ZEALANDI TE KŌTI PĪRA O AOTEAROACA423/2017[2019] NZCA 201BETWEEN CHIEF EXECUTIVE OF THE MINISTRYOF SOCIAL DEVELOPMENTAppellantAND GWYNETH BROADBENTRespondentHearing: 10 July 2018 (further materials received 27 July 2018, 10 August2018 and 17 August 2018).Court: Williams, Clifford and Gilbert JJCounsel: J K Gorman and O J G Upperton for AppellantS G Broadbent as attorney for RespondentW L Aldred and D W Ballinger as Counsel assistingJudgment: 31 May 2019 at 3.30 pmJUDGMENT OF THE COURTA The appeal is dismissed.B We answer the approved question as follows:(a) Whether the Chief Executive can include any income capable of beingderived from gifted assets valued below the permitted threshold in aperson's means assessment under ss 147 and 147A of the SocialSecurity Act 1964.No.C There is no order as to costs.____________________________________________________________________Table of contentsIntroduction ............................................................................................................. [1]Trust debts forgiven ............................................................................................... [6]Trust income counted back .................................................................................... [9]The long-term residential care means tested subsidy regime............................ [14]Step One — Assets ............................................................................................... [16]Step Two — Income ............................................................................................. [18]Deprived income or property .............................................................................. [21]Statutory purpose — the regime in context ......................................................... [26]The facts in more detail ........................................................................................ [28]Submissions............................................................................................................ [44]Chief Executive ................................................................................................... [44]Mrs Broadbent..................................................................................................... [47]Counsel assisting................................................................................................. [52]Identifying the correct gift.................................................................................... [59]Chief Executive ................................................................................................... [62]Counsel assisting................................................................................................. [64]Chief Executive's reply ........................................................................................ [67]Our approach ...................................................................................................... [68]Analysis .................................................................................................................. [69]Conclusion.............................................................................................................. [88]Result ...................................................................................................................... [92]REASONS OF THE COURT(Given by Williams J)Introduction[1] Gwyneth Broadbent is 81. She has been in long-term residential care since2014. She will remain in such care indefinitely.[2] Irrespective of her income, the maximum amount Mrs Broadbent can berequired to contribute to the cost of her care is $1,217.28 per fortnight (the maximumcontribution). Any additional cost is met by the relevant District Health Board (DHB).[3] Mrs Broadbent applied for an additional subsidy to reduce her contributionfurther. Such assistance is available but is means tested.[4] The question arising in this appeal is whether when means testingMrs Broadbent, the Chief Executive of the Ministry of Social Development (the ChiefExecutive) can take into account income she could have earned from assets she nolonger owns because she transferred them to certain family trusts.[5] We note at this point, that pt 4 of the Social Security Act 1964 (the Act) wasrepealed on 26 November 2018 and replaced by the Residential Care and DisabilitySupport Services Act 2018. That Act came into force on 26 November 2018.1 Wemust nonetheless apply the law as it existed at the date of the appeal.2Trust debts forgiven[6] Over the years of their marriage Mrs Broadbent and her late husband sold mostof their property interests at fair value to two trusts in which they were trustees and/ordiscretionary beneficiaries (the Trusts).3 In return the Trusts acknowledged debts backto the Broadbents. These loans were repayable on demand. There is a question as towhether there was an entitlement to interest on the loans, but as we shall see,the inference is none was provided for or claimed.[7] The Broadbents then undertook an orthodox debt forgiveness programme upto a maximum of $27,000 per annum. By 2013 the entire debt had been forgiven.[8] In 2014, the Ministry of Social Development undertook the required meansassessment to determine whether Mrs Broadbent qualified for an additional subsidy.41 Residential Care and Disability Support Services Act 2018, s 2(1).2 Residential Care and Disability Support Services Act, sch 1, cl 2(3) provides as follows:2 Needs assessments and means assessments under Part 4 of 1964 Act(3) Needs assessments and means assessments begun under Part 4 of the Social SecurityAct 1964, and not withdrawn or completed on the repeal of that Part, must be completed by[the Ministry of Social Development] under the corresponding provisions of this Act.This provision relates to applications that were being processed by the Ministry of SocialDevelopment at the time pt 4 of the Social Security Act 1964 was repealed. The Ministry of SocialDevelopment is defined in s 5 as the responsible department, the chief executive of that departmentor other statutory delegate. It does not include decisions or determinations of the Ministry ofSocial Development that are before the Social Security Appeal Authority or the courts.3 See below at [28].4 We note that the means assessment was undertaken by Ministry of Social Development employeesacting on the Chief Executive's behalf. We will refer to the actions of those employees as actionsof the Chief Executive.Trust income counted back[9] The Chief Executive found that Mrs Broadbent did not qualify for thisadditional subsidy because, by transferring most of her and her late husband'sproperties to the Trusts, she had deprived herself of income from those assets thatwould have been available to meet the costs of care.5 The Chief Executive consideredhe was entitled to disregard these transfers when calculating Mrs Broadbent's incomeand so count that deprived income back in.[10] On appeal, the Social Security Appeal Authority (the Authority) upheldthe Chief Executive's assessment.6 On further appeal to the High Court on a questionof law, Katz J reversed the Authority.7 The Judge found it was inherent in the notionof an unconditional alienation of property that the right to any income from it is alsolost.8 The Judge reasoned that, since Mrs Broadbent's debt forgiveness programmedid not breach the applicable gifting rules, the Chief Executive could not (in effect)count back in notional income from validly alienated assets. It was, the Judge found,not the intention of the residential care means testing regime to allow the ChiefExecutive to treat income differently from its parent asset.9 Rather, gifting the assettook any associated income out of reach for the purpose of means assessment.10[11] The Chief Executive was then granted leave to appeal that finding in the formof the following question:11[4] [w]hether the Chief Executive can include any income capable ofbeing derived from gifted assets valued below the permitted threshold ina person's means assessment under ss 147 and 147A of the Social Security Act1964.5 Social Security Act 1964, s 147A.6 An appeal against a decision of the Benefits Review Committee [2015] NZSSAA 91 [Authoritydecision].7 Broadbent v Chief Executive of the Ministry of Social Development [2017] NZHC 1499, [2017]NZAR 1127 [High Court decision].8 At [42].9 At [44].10 At [42] and [44].11 Chief Executive of the Ministry of Social Development v Broadbent [2017] NZCA 474.[12] It became apparent during the hearing of this appeal that this questionpresented difficulties. The Authority, the High Court and the parties in the appeal allappear to have proceeded on the erroneous basis that the gifting programme related tothe Trusts' assets. The Broadbents did not gift their properties to the Trusts but soldthem for fair value. The gifting related to the reduction to zero of the resulting debtback.[13] We have taken this difficulty into account when formulating our answer tothe question. As will be seen, issues may arise for further consideration.The long-term residential care means tested subsidy regime[14] No-one assessed as requiring long-term residential care "indefinitely" isrequired to pay the full cost of that care. Rather, they must make a contribution to thatcost. The contribution is capped and referred to in the Act as the "maximumcontribution".12 It varies by region.13 Any shortfall between the maximumcontribution and the actual cost of care must be met by the local DHB irrespective ofthe financial situation of the person in care (the general subsidy).[15] A person in need of care may also apply for an additional subsidy which isdesigned to relieve the applicant of liability to pay some or all of the maximumcontribution (the additional subsidy).14 This additional subsidy is means tested.15The Chief Executive must undertake the required means assessment in two steps. Firstthe applicant's assets are assessed to determine whether their value is at or below the"applicable asset threshold".16 In Mrs Broadbent's case the applicable asset thresholdis $224,654.17 Second, the applicant's income is calculated.1812 Social Security Act 1964, s 139(2).13 Section 152.14 Section 141(2).15 Section 141(1)(a).16 Section 146(2).17 Schedule 27, cl 1(2).18 Section 147(2).Step One — Assets[16] "Assets" for the purpose of this assessment are relevantly defined in sch 27,cl 4 as assets capable of being realised. An applicant's assets include the value of anyassets the applicant and/or their spouse or partner have gifted in the five yearspreceding the date of the means assessment.19 The exception to that rule is "allowablegifts" as prescribed by regulations made under the Act.20 Gifts are allowable gifts ifthey are made within the five-year gifting period provided their value did not exceed$6,000 per annum.21 That annual value may be averaged across the whole period.22[17] If the Chief Executive considers the applicant's assets are equal to or less thanthe value of the asset threshold, he or she must proceed to calculate the applicant'sincome under s 147.23Step Two — Income[18] In this second step, the Chief Executive must calculate the annual income ofthe applicant "as at the date of the means assessment",24 in order to determine whetherhe or she is entitled to receive the additional subsidy. "Income" for this purpose isdefined expansively in s 3(1) by reference to an extensive list of specific examples ofincome, but for present purposes the general catch-all in subsection (a) is relevant. Itprovides income "means any money received or the value in money's worth of anyinterest acquired, before income tax, by the person which is not capital ".19 Schedule 27, cl 4; and Social Security (Long-term Residential Care) Regulations 2005, reg 8.20 Schedule 27, cl 4(b) (definition of assets); and Social Security (Long-term Residential Care)Regulations, reg 9.21 Social Security (Long-term Residential Care) Regulations, reg 9(1)(b).22 Regulation 9(2). In addition to allowable gifts, there are also a number of assets specificallyexempted from the assets calculation in sch 27, cl 4. None of these exemptions is relevant in thiscase.23 Social Security Act, s 147(2).24 Section 147(3).[19] Schedule 27, pt 3 applies to income assessments. It relevantly excludes:(a) income from assets up to $982 per annum;25 and(b) any amount or type of income specified by regulations.26[20] At the end of this two-step process the Chief Executive will have determinedthe applicant's income in order to decide whether he or she should receivethe additional subsidy.Deprived income or property[21] Section 147A(1) of the Act enables the Chief Executive "in his or herdiscretion" to include in either step of the means assessment, "income or property,"27of which the applicant or their spouse or partner "has directly or indirectly deprivedhimself or herself". Its terms are as follows:147A Deprivation of assets and income(1) If the chief executive is satisfied that a person who has applied fora means assessment, or the spouse or partner of that person, hasdirectly or indirectly deprived himself or herself of any income orproperty (other than an exempt asset), the chief executive may in hisor her discretion conduct the means assessment as if the deprivationhad not occurred.[22] Section 155(1)(e) of the Act provides for the promulgation of regulations"prescribing for the purpose of s 147A, rules relating to deprivation of property,income, or both, and the circumstances in which those rules apply".[23] Regulation 9B of the Social Security (Long-term Residential Care)Regulations 2005 (the Regulations) was promulgated pursuant to s 155(1)(e). It setsout six "instances" of property or income deprivation which the Chief Executive maychoose to ignore when carrying out a means assessment. That is, he or she may chooseto treat the property or income as if it is still owned or earned by the applicant whencalculating her total assets or annual income. The list is inclusive and expressly25 Schedule 27, cl 5, definition of income-from-assets exemption at (a).26 Schedule 27, cl 5, definition of income at (k).27 Provided it is not a specifically exempted asset.declared to be non-exhaustive. After each "instance" an "example" of the drafter'sintention with respect to the relevant instance is set out. Although it does not arise inthis appeal, there may well be a question as to whether this regulation prescribes rulesat all, when it simply offers an inclusive list of instances of deprivation. We take thatmatter no further here.[24] It is necessary to set out reg 9B in its entirety:9B Deprivation of property and incomeFor the purposes of section 147A of the Act, instances of deprivationof property or income include, but are not limited to, the following:(a) gifts that are gifted in the 12-month period prior tothe commencement of the gifting period, or in any 12-monthperiod preceding that period, to the extent that the total valueof the gifts in each such period exceeds $27,000:________________________________________________ExampleIn the year before the commencement of the gifting periodthe person being means assessed and that person's spouse jointlymake gifts having a total value of $100,000.The person being means assessed and his or her spouse may betreated as having deprived themselves of $73,000 in respect ofthe gifts._____________________________________________________(b) a disposition of property at any time beforethe commencement of the gifting period for no consideration,or for a consideration less than the market value ofthe property at the time of disposition, may be treated as a giftfor the purposes of paragraph (a):________________________________________________ExampleTwo years before the commencement of the gifting periodthe person being means assessed and that person's partner transferthe $300,000 house that they jointly own to a family member for$100,000. One year before the commencement of the gifting periodthe person being means assessed and that person's partner gift$50,000 to another family member.The person being means assessed and his or her partner may betreated as having deprived themselves of $196,000 in respect ofthe disposition and the gift (being the sum of $200,000 less $27,000for the disposition of the house and $50,000 less $27,000 forthe monetary gift)._____________________________________________________(c) a disposition of property during the gifting period for noconsideration, or for a consideration less than the marketvalue of the property at the time of disposition:________________________________________________ExampleDuring the gifting period the person being means assessed sells hisor her car for $10,000. The market value of the car at the time ofsale was $20,000.The person being means assessed may be treated as having deprivedhimself or herself of property to the extent of $10,000 in respect ofthe car sale._____________________________________________________(d) a failure at any time to exercise any right or entitlement todemand a payment:________________________________________________ExampleThe spouse of the person being means assessed makes a loan toanother person with interest on the loan being payable on demand.The spouse of the person being means assessed never makesa demand for the interest.The spouse of the person being means assessed may be treated ashaving deprived himself or herself of interest to the extent ofthe amount of interest that is payable on demand._____________________________________________________(e) a waiver of a right at any time to receive any entitlement orpayment:________________________________________________ExampleThe person being means assessed and that person's partner jointlyown a rental property. The tenants of that property fail to paythe rent payable under the tenancy agreement. The person beingmeans assessed and that person's partner take no action to recoverthe unpaid rent.The person being means assessed and his or her partner may betreated as having deprived themselves of income to the extent ofthe unpaid rent._____________________________________________________(f) an investment at any time in non-income-earning assets:________________________________________________ExampleThe person being means assessed deposits savings in anon-interest-bearing bank account.The person being means assessed may be treated as having deprivedhimself or herself of income to the extent of income that could havebeen earned on the savings if the savings had been invested inan interest-bearing bank account._____________________________________________________[25] Two instances have particular relevance to the present case. The first isthe excessive gifting instance in sub-reg (a). This allows the Chief Executive to ignoregifts made before the five-year gifting period, the value of which exceed $27,000 perannum. The implication is, the Chief Executive must respect gifts of property orincome up to $27,000 per annum if made before the five-year gifting period.The second is sub-reg (f) giving the Chief Executive the discretion to treat investmentsin non-income earning assets as if they do in fact earn an income.28Statutory purpose — the regime in context[26] The language of s 147A of the Act and reg 9B of the Regulations must be readin light of the relevant statutory purposes. Section 1A of the Act sets them out.Paragraphs (b) and (c) are particularly relevant:1A Purpose(b) to enable in certain circumstances the provision of financial supportto people to help alleviate hardship:(c) to ensure that the financial support referred to in paragraphs (a) and(b) is provided to people taking into account—(i) that where appropriate they should use the resources availableto them before seeking financial support under this Act;28 The latter arises because the relevant assets in this case are the debts back.[27] Thus, for the purposes of this case, the focus of the long-term care meanstesting regime must be the alleviation of hardship which means those in need of caremust first look to the resources available to them to meet the costs of that care.29The facts in more detail[28] In 1989, Mrs Broadbent's brother-in-law settled the AW & GI BroadbentFamily Trust (the Family Trust) for Mr and Mrs Broadbent. The Broadbents, theirchildren and grandchildren and the spouses of such issue were discretionarybeneficiaries. The Broadbents were the trustees. They sold their holiday home andshares in certain investment properties to the Family Trust over the ensuing threeyears. Together these assets were valued at $46,750. The Broadbents loaned back theentire purchase price and forgave that debt over three years in tranches of between$15,000 and $16,000 per year. In later years the Broadbents transferred their familyhome to the Family Trust, together with other property, and progressively forgave thatdebt. We were not provided with evidence to suggest the Broadbents chargedthe Family Trust interest during the term of the loan.[29] In 1998, Mr Broadbent died. His entire estate, including his interests in certaincommercial buildings, a term deposit, a life insurance policy and various cars, boatsand other assets, were left to Mrs Broadbent. She then sold them to the AW & GIBroadbent Children's Trust (the Children's Trust).30 This trust was also settled by herbrother-in-law. Mrs Broadbent was appointed the sole trustee of the Children's Trust.The children, grandchildren and their spouses were discretionary beneficiaries.Mrs Broadbent sold these assets at market value and took a loan back for the purchaseprice. The value of the loan was $282,000. Mrs Broadbent then set about reducingthe loan by way of a debt forgiveness programme in annual tranches at or less than$27,000 per annum. The programme ended in 2013 by which time29 Similar comments have been made by the High Court in the context of other benefit entitlements.For example see Chief Executive of the Department of Work and Income v Vicary [2001] NZAR628 (HC) at [25] "[t]he concern and purpose of the Act is to aid those who are truly in need offinancial assistance in a way that is administratively efficient and not wasteful of public funds".See also Director-General of Social Welfare v W [1997] 2 NZLR 104 (HC) at 108 "[i]t is policyto provide benefits where there is need; but it likewise is policy to expect claimants to call upontheir own resources, and the resources of those properly obliged to them, before calling onthe state."30 The relevant assets of the Children's Trust and Family Trust are set out below at [31]–[35].the Children's Trust debt had been entirely forgiven. At an early stage the Children'sTrust lent its entire capital to the Family Trust and the latter managed the assets of bothtrusts. It is accepted that the Family Trust made occasional capital distributions toMrs Broadbent in the period before 2013 but did not distribute income.[30] As noted, by the date of Mrs Broadbent's means assessment in 2014, sheowned no significant assets and had no private income.[31] When the Chief Executive undertook his means assessment, he accepted thatMrs Broadbent and her late husband's annual gifts to the Trusts were valued at lessthan the excessive gifting threshold in reg 9B(a) of the Regulations. This in turn meantthat Mrs Broadbent's assets were valued at less than the asset threshold for the purposeof step one of the means assessment. However, when he turned to assessing herincome at step two, the Chief Executive counted back in (what he considered were)gifted assets because the gifts deprived Mrs Broadbent of potential income.[32] The Chief Executive applied alternative approaches to calculating the deprivedincome. Both approaches focussed on the income earning potential of the Trusts.The Chief Executive erroneously ignored the fact that the gifts were by way of debtforgiveness, they were not gifts of the assets themselves. We come back to this pointin our analysis.[33] Option one identified the 2014 income of the trust owned companies asfollows:(a) Polaris Rentals Limited $26,189(b) Seychelle Properties Limited $9,830(c) Eldon Chambers Limited $8,227Total A $44,246[34] The Chief Executive added a notional income figure from the other assets ofthe Trusts that were not income earning to this (except for the family home and holidayhome which the Trusts also retained). The assets were as follows:(a) Investments $33,290(b) Westpac term deposit account $195,056(c) Loan to Mrs Broadbent's daughter $87,099Total Assets $315,445[35] The Chief Executive then calculated the notional income figure usingthe applicable Reserve Bank rate at the time of 4.19 per cent. This produced "Total B"of $13,217.15.[36] The calculation was then as follows:(a) Total A $44,246.00(b) Total B $13,217.15________$57,463.15(c) Less tax at 21% $12,067.26(d) Assessed income $45,395.89[37] In option two, the Chief Executive grossed up the current value of all assetsheld by both Trusts (presumably including the home and holiday home), to producea figure of approximately $1,935,000. Then applying the Reserve Bank rate of4.19 per cent, notional income on those assets would have been $81,093.50.[38] The Chief Executive concluded that, on either basis, Mrs Broadbent wasdisqualified from further assistance because her income for the purposes of s 147,including deprived income under s 147A, was too high.[39] On appeal to the Authority, the Chief Executive's decision was upheld.31The Authority found that Mrs Broadbent had not deprived herself of assets withinthe meaning of the Act but had deprived herself of their associated income:[28] In this case the appellant and her late husband at various times havedeprived themselves of assets and the associated income by:(a) transferring their assets and any income associated with thoseassets to the Family Trust;(b) making decisions to place assets acquired after theestablishment of the Family Trust in the ownership of the Trustrather than in their personal ownership;(c) in the case of the appellant, transferring the funds and assets sheinherited from her husband to the Children's Trust;(d) failing to ensure that interest was paid on the loan made tothe Family Trust by the Children's Trust;(e) failing to ensure that loans made to other beneficiaries ofthe Family Trust generated an income; and(f) failing to ensure all of the Family Trust would be paid tothe appellant.[40] The Authority took the view that the means assessment criteria for assets andincome are separate and not interdependent.32 Because, the Authority considered,the regulations in relation to income make no provision for the exemption of incomefrom validly gifted assets, it was not required to exclude such income.33[41] In the High Court, Katz J took a different view. The Judge carefully analysedthe concept of "gift" in the common law.34 The applicable principle is, the Judgeconsidered, that the absolute or unconditional gift of an asset to another personnecessarily includes all of the rights, benefits and entitlements associated with thatasset, including any right or entitlement to future income.3531 Authority decision, above n 6.32 At [32].33 At [33].34 High Court decision, above n 7, at [39]–[41].35 At [42].[42] The Judge then reasoned that the means assessment scheme "must beinterpreted consistently with these long-standing principles of the common law".36Any gift of assets must be taken to be unconditional. The Judge then found:[45] It follows that, if the $27,000 permissible gifting threshold isexceeded, then the Ministry may conduct the assets assessment as if the donorstill retained that portion of the gift in excess of $27,000. Similarly, whenconducting the income assessment, the Ministry is entitled to take into accountthe actual or notional income on the excessive portion of the gift. It may not,however, conduct the income assessment as if there had been no gift at all.[43] The Judge considered that this orthodox approach was consistent withthe overall purpose of the Act, including that where appropriate people should useresources available to them before seeking financial support from the state. The Judgethen moved to pt 4 of sch 27 of the Act. Its purpose was to provide specific guidanceas to the circumstances in which those in need of residential care are required to payfor it:[46] Part 4 excludes from consideration gifts of up to $6,000 per annumduring the gifting period and gifts of up to $27,000 per annum in any yearprior to that. As the Court of Appeal observed in B v Chief Executive of theMinistry of Social Development, people are not allowed to preserve theirresources for the use of their families or themselves by gifting beyonda permitted limit.[37] In this case that "permitted limit" has not been exceeded.SubmissionsChief Executive[44] The Chief Executive submitted that the High Court's approach wasinconsistent with the purpose of the deprivation rules. Section 147A, it was argued,entitled the Chief Executive to adopt a counter factual premise for the purpose of hisassessment. That is the applicants own assets when they do not, or received incomewhen they did not. There is, it was argued, therefore no reason to conclude that s 147Aproceeds on the common law-based assumption that income is taken out of play whenits source asset is transferred without deprivation. Rather the Chief Executivesubmitted that the Authority was correct when it concluded assets and incomeassessments are separate and unrelated steps in the means assessment.36 At [44].37 B v Chief Executive of the Ministry of Social Development [2013] NZCA 410, [2013] NZAR 1309at [17].[45] Regulation 9B of the Regulations should, it was submitted, be readpurposively. It provides, by inference, only limited exceptions to the ChiefExecutive's broad discretion in s 147A of the Act. The Chief Executive submitted: the examples in [reg] 9B are divided into instances of property deprivationand instances of income deprivation. The reference to gifting over $27,000 ina 12-month period means that gifting of assets under this threshold will nottrigger the discretion in s 147A, but this does not mean that income from suchassets are exempt from the discretion.[46] In this case, the value of the Trusts' assets is now much higher than that ofthe original gifting. And it is entirely within the control of Mrs Broadbent's family.The whole point of s 147A is to allow the Chief Executive to take proper account ofthat reality.Mrs Broadbent[47] For Mrs Broadbent, her son and attorney Stephen Broadbent advancedthe following submissions on her behalf.[48] First, income from validly gifted assets cannot be said to be deprived incomeof the donor because the natural reading of reg 9B(a) is that it applies both tothe property and its related income.[49] Second, if income from non-deprived property can be counted back, this willprovide the Chief Executive with an additional power not intended by s 147A. Iteffectively makes the first stage of the means assessment (as to assets) irrelevant.The second stage cannot have been designed to produce that result. Third, even ifthe Chief Executive is right, Mr Broadbent submitted that any ruling ought to applyprospectively only, and exclude Mrs Broadbent's case.[50] Mr Broadbent made further submissions in support of the reasoning inthe High Court, and they do not need to be repeated here.[51] Finally, Mr Broadbent argued there were natural justice issues in terms ofthe way the Chief Executive failed to disclose informal policies being applied, and(allegedly) abused his power in various ways. While these arguments were genuinelyadvanced in good faith, they are not relevant to the question that must be answered,and so we set them to one side.Counsel assisting[52] This Court appointed Ms Aldred to assist the Court by acting as a contradictorfor the appeal and to ensure that all relevant arguments were put before the Court. Shewas directed to confer with Mr Broadbent for that purpose.[53] Ms Aldred submitted that the interpretation adopted by the High Court isconsistent with the scheme of the Act and the purpose and text of the deprivationprovisions. The scheme of the Act is that people like Mrs Broadbent who require careare entitled to financial support where they lack the resources to support themselves.[54] While s 147A contains a wide discretion, it would undermine the policies ofthe permissible gifting regime if income from gifted assets could be counted back.First, Ms Aldred argued it would greatly add to the administrative complexity ofthe scheme because all gifts made by applicants over their lifetimes are potentiallyavailable for consideration under s 147A. Second, it would render the whole field ofretirement planning far less certain for New Zealanders and that ought to be avoided.[55] Further, Ms Aldred submitted, the text of the relevant provisions is alsoconsistent with the High Court's interpretation. Section 147A focusses on the act ofdeprivation and its consequences. It is not focussed on the value of the deprivation.Regulation 9B provides instances of deprivation of income or property and reg 9B(a)includes gifts of excessive value as one such instance. Gifts that are not of excessivevalue are not deprivations, so the discretion in s 147A is, by definition, not triggeredin relation to them.[56] Ms Aldred called in aid the structure of reg 9B. Instances (a)–(c) relate to giftswhile instances (d)–(f) relate to waiver of rights to payment, failure to exercise suchrights or foregoing an opportunity to obtain income through investment. Tellingly, itwas submitted, the example given to explain the ambit of the excessive gifting clausedoes not differentiate between property and income. All other examples identify theincome or property nature of the deprived item, including the other gifting examplesin (b) and (c). This, it was argued, recognised the fact that gifts of property will alwayshave two dimensions, the property and its associated income.[57] To interpret the deprivation provisions as if they are intended to overridethe longstanding common law rules about the effect of unconditional dispositions ofproperty, would require clear wording. While s 147A is admittedly broad, the clearwords are missing.[58] Ms Aldred argued that the Chief Executive's concern was the practical one thatMrs Broadbent could support herself from the income streams of the assets she giftedto the Trusts. But, she submitted, s 147A is not a "trust-busting" provision. It doesnot suggest that the identity of the donee is relevant to the discretion. On the contrary,the provision applies equally to donees who might be either able or unable to returnthe income stream to the applicant donor.Identifying the correct gift[59] As we have said, it became clear during the course of argument thatthe Authority had proceeded on the premise that it was the assets formerly owned byMrs Broadbent and her late husband that were gifted to the Trusts.38 This can be seenin the terms of the Authority's finding at [28], which focusses on deprivation ofthe "assets and the associated income [of the Trusts]". In the High Court, Katz J wasnot called upon to question that proposition. She accurately recorded that the Trustshad purchased all assets at what appeared to be fair value, and that it was in factthe associated debts that were steadily gifted in the ensuing years.39 But because ofthe view she formed that income always follows assets anyway,40 it was not necessaryfor her to identify precisely what the gifts in question were because it made nodifference.[60] On the facts as we have them, the position is that the actual propertyMrs Broadbent deprived herself of was the principal of the forgiven loans — i.e.the right to repayment of that principal and not the Trust's assets themselves. If this is38 Authority decision, above n 6, at [28].39 High Court decision, above n 7, at [2].40 At [42].correct, the only deprived income (if it was such) was interest on the loans.The current value of the Trusts' assets and/or their actual income were irrelevant forthe purpose of calculating Mrs Broadbent's deprived income.[61] The parties made further submissions on this question. It is appropriate toaddress these separately.Chief Executive[62] For the Chief Executive it was argued that since the loan was not interestbearing, there was nonetheless still a deprivation of income. First, there wasdeprivation in relation to the unforgiven (but steadily reducing) portion ofthe principal. Second, there was deprivation of income derivable from the validlygifted portion of the principal. All of this income could be counted back. Given thedifficulty in assessing and applying historical interest rates, which at least in the 1980swould have been high by current standards, the Chief Executive was entitled to take a"holistic view" of the situation. The approach he took, though not strictly incompliance with legal form, produced a result that was workable and fair and so waswithin the broad discretion available to the Chief Executive under s 147A.[63] The Chief Executive argued further that, if that was wrong, it was nonethelessopen for the Court to reconsider by focussing on the correct act of deprivation and toanswer the question on that alternative factual basis. There was, it was argued, noprejudice to Mrs Broadbent in this approach and it was consistent with r 48(5) ofthe Court of Appeal (Civil) Rules 2005 allowing the Court to exercise its powers "eventhough the notice of appeal may state that only part of a decision is appealed from."Counsel assisting[64] Ms Aldred submitted that it was not open to this Court on a third appeal toengage in general error correction or to undertake a new fact-finding exercise. Bothsteps were required if the Court proceeded to answer the question on a different factualbasis to that found or assumed in the forums below.[65] Furthermore, Ms Aldred argued there will be evidence relevant to these mattersthat is not before us. For example, she submitted, Mrs Broadbent and her husbandoccupied the family home and the holiday home rent free for many years afterthe transfer. Had the issue been advanced in the manner postulated, Mrs Broadbentcould have argued that there was no deprivation of income in fact because the interestfree loan was off-set by the provision to them of free accommodation. Expert evidencemay have been required in that and other respects. Further, Ms Aldred argued therewas no clear evidence before the Court that the loans to the Trusts were non-interestbearing. That simply seems to be assumed because of evidence in relation toa different loan from Mrs Broadbent to the Children's Trust.[66] Ms Aldred argued that it was, all in all, too late for this Court to answera different question from that posed, in relation to a different set of facts.Chief Executive's reply[67] In reply, the Chief Executive submitted, Mrs Broadbent has never suggestedthat the loans were interest bearing and it would be wrong for this Court to proceed toresolve the question before it on an artificial (and ultimately irrelevant) factual basis.Our approach[68] While it does seem to us that the focus in this proceeding should have beenthe principal (and any acts of deprivation in relation to it), in our view the best practicalapproach now is to answer the question as posed and then to address the question ofhow to deal with any factual issues that arise following that.Analysis[69] The question is specific. It asks whether the Chief Executive can include anyincome capable of being derived from validly gifted assets, that is gifted assets valuedbelow the excessive gifting threshold contained in reg 9B(a). In other words, canan asset that Mrs Broadbent disposed of without deprivation nonetheless generatenotional income capable of being treated as deprived income under s 147A?[70] The starting point is that the assets and income assessments are separate andserve different purposes in a means assessment. The assets assessment establisheswhether the applicant qualifies to be considered for an additional subsidy.41 That ispresumably because a person with more assets than the maximum allowable value canbe expected to sell some or generate sufficient income from them to avoid hardship.The income assessment establishes how much the subsidy should be.42 Its focus is onhow much the applicant actually lives on. The two assessments are governed byseparate provisions (s 146 and pt 2 of sch 27 as to assets; s 147 and pt 3 of sch 27 asto income).[71] The original deprivation count back provisions were also separate. They werecontained in sch 27. Clause 4(c) related to deprived assets and cl 5(e) related todeprived income. But by a 2006 amendment those clauses were brought together ass 147A.43[72] The discretion in the Chief Executive to count back deprived property andincome has always been broad. It closely follows the drafting formula long used inmeans assessments for other benefit categories.44 That is probably why s 147A refersto "income or property" rather than assets and income which is the terminologyemployed in ss 146, 147 and sch 27.[73] Section 147A contains its own two-step process. In the first step, the ChiefExecutive must be satisfied that an arrangement affecting the applicant's income orproperty amounts to a deprivation. In the second step, he or she must then decidewhether to ignore that arrangement when carrying out the means assessment. Herethe Chief Executive has a discretion as to how to proceed. He or she may choose toignore the deprivation or, alternatively, decide to respect it.41 Social Security Act, s 146.42 Section 147.43 Social Security (Long-term Residential Care) Amendment Act 2006, s 21.44 See for example Social Security Act, ss 74(1)(d). The formula appears to have been first used inSocial Security Act 1938, s 62(d) and applied to superannuation, age-related benefits, widows'pensions, orphans' benefits, family benefits, invalids' benefits, miners' benefits, sickness orincapacity benefits, unemployment benefits, Maori war pensions (sic), and hardship benefits.[74] Deprivation is therefore a gateway requirement. The sense here is thatMrs Broadbent has dispossessed herself of certain rights to, or taken steps to preventherself from, directly accessing the benefit of the property or income in question.A common indicator of such deprivation will be an unequal exchange of value inreturn for the right or benefit given up. This is reflected in reg 9B's focus on gifts,dispositions at undervalue, the forgoing of valuable rights without compensation, andthe failure to utilise valuable assets retained in a financially prudent way. Assets soldor exchanged for good value are not deprivations. Section 147A therefore has noapplication to them.[75] Deprivation may be direct or indirect. The most obvious example of indirectdeprivation is that contained in reg 9B(f) — the failure to invest valuable assets ina manner that generates income. In such circumstances, deprivation of income isan indirect result of that failure.45[76] The Chief Executive's discretion at step two of s 147A (if triggered) is broad,but not unfettered. It is informed and constrained by the relevant purposes of the Actin s 1A(b) and (c)(i) to which we have already made reference. They provide thatthe focus of the Act is the alleviation of hardship. The means assessment regime forlong-term residential care is designed to ensure that only those who cannot afford topay the maximum contribution for care, receive additional help. Therefore, peopleshould look to any private "resources available to them" to meet the costs of their carebefore turning to the state for additional taxpayer funded support.46 Section 147A isthus a practical tool to assist the Chief Executive in deciding whether an applicant isin genuine hardship.[77] The key driver at step two therefore is the "availability" to the applicant ofalternative resources. To be available in this context means able to be accessed orutilised. Whether an applicant can access alternative resources will be a question offact.45 See for example Chhima v Chief Executive Ministry of Social Development [2007] NZAR 484(CA).46 Social Security Act, s 1A(c)(i).[78] The corollary must be that all of those in need of long-term care and in genuinehardship are entitled to the extra support in pt 4 of sch 27. The Chief Executive mayuse his or her discretion to require applicants to put their available resources to workin order to earn a reasonable income, but may not use it to punish applicants for pastbad investment decisions or profligacy. The discretion is informed by factualcircumstances not moral judgements.[79] With that background in mind, we agree with Katz J that reg 9B(a) warns assetowners that any gift having the effect of excluding income or property from meanstesting under ss 146 and 147 will be ineffective if the value of the income or propertysubject to the arrangement exceeds the permitted annual limit.47 We were not providedwith background material that might have explained why the figure of$27,000 per annum was adopted in reg 9B(a), but it is clearly no coincidence that it isthe same as the annual gifting limit which applied in estate planning until the abolitionof gift duty in 2011.48 It is therefore a number familiar to those who had, prior to thatdate, amassed sufficient property or income to make the adoption of a giftingprogramme advantageous for estate planning purposes. Its adoption in long-termresidential care means testing allowed those who made estate planning arrangementsin reliance on that figure, to repurpose them for long-term care planning.[80] The term "gift" is not defined in the Act or the Regulations, but as Katz Jdiscussed,49 it must be taken to carry its ordinary and well understood meaning unlessthere is a good reason to adopt a different meaning. Both regs 9 and 9B(a) have widecoverage. Gifts may be "real or personal property (for example money)",50 or theymay be "property or income".51[81] We acknowledge the Chief Executive's point that the assets assessment unders 146 is separate from the income assessment under s 147, but that does not necessarilymean he is entitled to a second bite at validly gifted property that has income earningpotential. The natural inference from the employment of "gift" in the Regulations is47 High Court decision, above n 7, at [46], citing B v Chief Executive of Ministry of SocialDevelopment , above n 37, at [17].48 Estate and Gift Duties Act 1968, s 61.49 High Court decision, above n 7, at [39]–[42].50 Social Security (Long-term Residential Care) Regulations, reg 9(1).51 Regulation 9B(a).that if it relates to property capable of earning income, the gift will include its incomeearning potential. Indeed such potential is usually an important element in themonetary value of the property gifted. The greater its income earning potential,the higher its fair value will be. It seems to us there is no particular reason to set thatnatural inference aside when applying s 147. On the contrary it is consistent withthe intention of the regulations to create a minimum value below which the deprivationgateway cannot apply.[82] Three points follow. First, where, as here, the property is sold at fair value,there cannot have been a deprivation of its potential income because the income streamhas also been sold for fair value as part of the price of the property. Second, annualgifting of portions of the value of the resulting debt (where the purchase price issatisfied by a loan back) at a rate below the excessive gifting threshold would logicallyalso transfer, without deprivation, the income stream associated with that portion ofthe debt. Third, and as a corollary, income deprivation will occur in relation tothe steadily decreasing loan principal if the lender has not claimed interest on thatfigure. The Chief Executive will have a discretion to calculate that notional reducingincome stream and to treat it as income of the applicant for the purpose of s 147. AsKatz J found, when he or she calculates Mrs Broadbent's income, the Chief Executivecannot take account of any gift whose annual value was below the excessive giftingthreshold.52[83] Moving then to the second of the two steps in s 147A, if the Chief Executiveis satisfied that the applicant has directly or indirectly deprived himself or herself ofincome such that the discretion in s 147A(2) is triggered, the question for the ChiefExecutive is whether there are resources available to which the applicant should haverecourse. If there are, then the Chief Executive is entitled to ignore the fact (if it isthe case) that Mrs Broadbent did not charge interest on the outstanding debt andcalculate her current income as if she had.[84] In this case, a trustee of the Family Trust is empowered to make distributionsof trust income to Mrs Broadbent. It does not matter that Mrs Broadbent is merely52 High Court decision, above n 7, at [45].a discretionary beneficiary. She has a right to request payment from the FamilyTrust.53 In a closely held family trust with a history of payment to her, trust incomemust be assumed to be available unless there are particular circumstances thatdemonstrate it is not.[85] As we have said, the income calculation (on the facts as we know them thusfar) under ss 147 and 147A can only relate to interest on the reducing debt principal,because that is what, if anything, was deprived. But it must be remembered this isa counter factual calculation — it is presumed income. Assessing availability atthe discretionary stage is a more practical task. Here, as we have said, Mrs Broadbentappears to have available to her other resources to provide that presumed income. Tothat extent, we agree with the Chief Executive that s 147A is designed to look throughthe thicket of legal arrangements in order to make decisions about the allocation ofpublic funds based on the real economic and social relationships that exist. But thereare limits to how far that can go. Even if the trust produces more income thanthe deprived amount under s 147A, the Chief Executive cannot treat the Trust'sincome as if it is Mrs Broadbent's income. That would be to fail to comply withthe directive of s 147 which is to calculate Mrs Broadbent's income in accordance withs 3(1), pt 3 of sch 27, s 147A and reg 9B; and then to decide whether that income isso low that further state support is required. It is important therefore to keep thetwo steps in s 147A separate.[86] In practical terms that means the Chief Executive is not entitled to gross upthe value of the assets of the Family Trust, calculate a notional income from that value,and treat that as if it were Mrs Broadbent's income for the purposes of s 147. This isessentially the second income calculation methodology approved by the Authority inits decision. Nor can the Chief Executive ignore the debt validly forgiven byMrs Broadbent (and her husband before he passed away) in order to adopt a notionaland constant interest rate available to her on that debt. Rather, the Chief Executivemust adopt a calculation methodology that recognises Mrs Broadbent's notionalincome from the debt would have steadily reduced over time and then determine in53 See Blackledge v Social Security Commission HC Auckland CP81/87, 17 February 1992 (transferof all assets to community trust) in relation to a similar trust arrangement at 26; and Keenan vDirector-General of Social Welfare HC Auckland AP24-SW00, 19 June 2000 (interest free loanto trust).light of that, what a reasonable current income figure should be taking intoconsideration the terms and purposes of the means testing regime.[87] We acknowledge that there is no single way of doing this. We do not think itappropriate or helpful to attempt at this stage to constrain how it should be workedout. We simply note that, to be consistent with the Act and the Regulations, that isthe task the Chief Executive must undertake.Conclusion[88] The answer to the question posed at [11] is therefore, no, the Chief Executivecannot include any income capable of being derived from gifted assets valued at lessthan the excessive gifting threshold.[89] It is plain nonetheless that the controversy between the Chief Executive andMrs Broadbent is not finally resolved by that answer. That is because, whenthe Authority focussed directly on income from trust assets in calculating deprivedincome, it was in error. It should have focussed instead on the deprived income (ifany) of the debt back, that is, any interest free component. We accept Ms Aldred'ssubmission that the Authority probably did not have sufficient evidence before it toresolve whether the $27,000 "gifts" were deprivations at all (for example, Ms Aldredsubmitted there could have been no depravation in substance if the Broadbents enjoyedfree accommodation — see above at [65]), and if they were, whether they weredeprivations of property or income or a mix of both. It follows that whenreconsidering its determination in accordance with the judgment of the High Court,the Authority must also undertake a further factual inquiry into these matters.[90] Section 12Q of the Act provides that appeals to the High Court are brought byway of case stated on a question of law. Section 12R provides for second appeals tothis Court. The procedure adopted is that set out in sub-pt 8 of pt 6 of the CriminalProcedure Act 2011 which relates to appeals on a question of law. This Court mustproceed on the basis that the High Court's determination had been made undersection 300 of that Act.[91] Our remedial powers are constrained under this procedure. Section 306provides that on second appeal, this Court must either allow the appeal or dismiss it,but there is no power to make further orders if the appeal is dismissed.54 The appealmust therefore be dismissed. The matter will be remitted to the Authority inaccordance with the judgment of the High Court subject to the observations we madeat [88] of this judgment.Result[92] The appeal is dismissed.[93] We answer the approved question as follows:(a) Whether the Chief Executive can include any income capable of beingderived from gifted assets valued below the permitted threshold ina person's means assessment under ss 147 and 147A of the SocialSecurity Act 1964.No.[94] There is no order as to costs.Solicitors:Crown Law Office, Wellington for Appellant.54 According to s 307 of the Criminal Procedure Act 2011, this Court has the High Court's widerpowers under s 300 only if the appeal is allowed.