SHEFFIELD-LAMB v THE CHIEF EXECUTIVE OF THE MINISTRY OF SOCIAL DEVELOPMENT [2017] NZHC 2201

SHEFFIELD-LAMB v THE CHIEF EXECUTIVE OF THE MINISTRY OF SOCIAL DEVELOPMENT [2017] NZHC 2201 [11 September 2017]IN THE HIGH COURT OF NEW ZEALANDWELLINGTON REGISTRYCIV-2016-485-515[2017] NZHC 2201IN THE MATTER OF An appeal by way of case stated from thedetermination of the Social SecurityAppeal Authority at Wellington unders 12Q of the Social Security Act 1964BETWEEN JOY SHEFFIELD-LAMBAppellantAND THE CHIEF EXECUTIVE OF THEMINISTRY OF SOCIALDEVELOPMENTRespondentCounsel: Appellant in person with G Howell as McKenzie FriendN Bailey and O Upperton for RespondentJudgment:(On the papers)11 September 2017JUDGMENT OF CLIFFORD JIntroduction[1] The appellant, Joy Sheffield-Lamb has received a New Zealand benefit since she turned 60. Mrs Sheffield-Lamb has also received New Zealand Superannuation (NZS) since she turned 65 on 16 January 2014. When Mrs Sheffield-Lamb applied for NZS she was, because she had previously worked in the United Kingdom, required to apply for a UK pension. She was granted a UK pension of £2.15 per week from 20 January 2014.[2] Section 70 of the Social Security Act 1964 (the Act) requires Mrs Sheffield-Lamb's payments of NZS to be abated by the amount of her UK pension payments. When Mrs Sheffield-Lamb was granted her UK pension, sheaccepted what is known as a "Special Banking Option Offer" from the respondent,the Chief Executive of the Ministry of Social Development, with the result that her weekly payment of UK pension is paid into a special bank account, and then to the Chief Executive.[3] Under UK law, Mrs Sheffield-Lamb had been eligible to receive that pension from the age of 60. In addition to her ongoing entitlement to the pension of £2.15 per week, she was also entitled to a lump sum payment by reference to the five years during which she had been eligible for, but had not received, that pension. The lump sum entitlement was also paid into the special bank account.[4] Following the receipt of that lump sum, the Chief Executive in effect deducted from it the amount of Mrs Sheffield-Lamb's next payment of NZS. When that payment fell due, paid Mrs Sheffield-Lamb her regular instalment of NZS together with the balance of that lump sum. That is, the Chief Executive applied s 70 of the Act to that lump sum to fully abate one instalment of NZS, and paid Mrs Sheffield-Lamb the balance.[5] Mrs Sheffield-Lamb challenged that decision. That decision was upheld by the Social Security Appeal Authority (the Authority).1[6] The Authority reasoned:2(a) As the Authority and High Court had previously found,3 payments received from the United Kingdom Pension Service and payable pursuant to the Social Security Contributions and Benefits Act 1992 (UK) and related legislation met the criteria of s 70 of the Act and had to be deducted from entitlement to any benefits received in New Zealand. The Chief Executive had therefore been right in deciding s 70 applied.1 Sheffield-Lamb v Chief Executive of the Ministry of Social Development [2015] NZSSAA 98.2 At [11], [13] and [14].3 Dunn v Chief Executive of the Ministry of Social Development [2008] NZAR 267 (HC).(b) The correct approach to the lump sum payment would have been for the Chief Executive to conduct a backdated review of Mrs Sheffield-Lamb's benefit entitlements under s 81, and deduct weekly amounts from her entitlement to benefit over the period back to 19 January 2009. Had Mrs Sheffield-Lamb not been in receipt of a benefit throughout that period, she would have been entitled to receive the arrears.(c) There was no basis for the Chief Executive to retain a lump sum payment of pension if the payment related to a period that the beneficiary was not receiving a benefit or pension in New Zealand.Case stated[7] Mrs Sheffield-Lamb now appeals that decision, by way of case stated on a question of law, to this Court.[8] The Authority stated the following case:1. Did the Authority err in law in concluding that the lump sum payment received by [Mrs Sheffield-Lamb] should have been spread over the period to which it related?2. Did the failure of the Chief Executive to require [Mrs Sheffield-Lamb] to apply for a United Kingdom pension when she turned 60 years of age amount to an error on the part of the Ministry which should have resulted in the full amount of the payment being refunded to [Mrs Sheffield-Lamb]?3. Did the Authority err in law in finding that the Chief Executive wasentitled to deduct the payment of "additional pension" from one fortnight's instalment of New Zealand Superannuation?Procedural history[9] The Authority made its decision on 11 December 2015. The Authority's casestated was filed on 11 July 2016. At Mrs Sheffield-Lamb's request, it wassubsequently determined that her appeal would be dealt with on the papers. The Wellington earthquake of November 2016 interrupted matters. Pursuant to directions of this Court, Mrs Sheffield-Lamb filed written submissions dated28 November 2016 and 27 January 2017: the Chief Executive did so on 20 December 2016 and 17 February 2017.[10] I was provided with the file, as duty Judge in the High Court at that time, on 20 February 2017. I acknowledge the long delay in my delivering this judgment.Legal context[11] Section 70 of the Act provides that New Zealand pensions or benefit will be reduced where a person receiving that pension or benefit is also in receipt of a like pension or benefit from overseas.[12] In short the section applies where a person:(a) Is "entitled to receive or receives a benefit, pension, or periodicalallowance granted elsewhere than in New Zealand"; and(b) The "benefit, pension, or periodical allowance, or any part of it" is:(i) In "the nature of a payment which, in the opinion of the chiefexecutive, forms part of a programme providing benefits, pension, or periodical allowances for any of the contingenciesfor which benefits, pensions, or allowances may be paid" under New Zealand's social security legislation; and(ii) Is "administered by or on behalf of the Government of the country from which the benefit, pension, or periodical allowance is received".[13] In that situation "the rate of the benefit or benefits that would otherwise be payable under" New Zealand's social security legislation must, subject to several qualifications and provisos that are not relevant for present purposes, "be reduced by the amount of such overseas benefit, pension, or periodical allowance, or part thereof, as the case may be, being an amount determined by the chief executive inaccordance with regulations made under this Act".[14] Section 70 provides two methods of ensuring that a person who is entitled to receive a New Zealand and an overseas pension benefit does not receive the full amount of both: a default method and the special banking option.[15] The default method is for the person's New Zealand benefit to be reduced bythe amount of the overseas pension, as determined by the Chief Executive in accordance with the Social Security (Overseas Pension Deduction) Regulations 2013 (the Deduction Regulations). The formula applied by the default method for reducing the amount of NZ benefit is set out in reg 4 of the Deduction Regulations:(1) Where section 70(1) of the Act requires a benefit to be reduced,—(a) each instalment of the benefit must be reduced; and(b) the amount by which each instalment is reduced must be calculated according to the following formula:(a × b) − cwhere—a is the amount of the overseas pension, in the currency of the country paying the pension, payable to the overseas pensioner during the instalment period; andb is the calculation rate determined under regulation 5; andc is the bank fee determined under regulation 6.[16] "Instalment period" is defined in reg 3 of the Deduction Regulations asmeaning the period "beginning on the commencement of the day on which an instalment of a benefit is paid" and "ending with the close of the day before the dayon which the next instalment of that benefit is paid".[17] It is in that context that the issue arises as to whether the Chief Executive dealt with the lump sum payment of accrued entitlements correctly.Analysis[18] Both Mrs Sheffield-Lamb and the Chief Executive have reservations about the case stated by the Authority.[19] Mrs Sheffield-Lamb submits that the third and, from her point of view, central question is whether the Authority erred when it deducted the lump sum payment from her NZS, rather than the method he adopted in doing so. She also submits that the issue is whether the Chief Executive erred in abating her NZS because of the £2.15 per week payments of Additional Pension as well. She says the answer to both questions is yes. That position reflects Mrs Sheffield-Lamb'ssubmission as to the nature of the UK pension she receives: she says "that pension iswhat is known under the UK legislation as an Additional Pension, as distinct fromthe Basic Pension". She explains:The distinction between the Basic Pension and Additional Pension is clear. The former is clearly captured by section 70 as it is in effect universal and contributed to by the UK tax-payer. The Additional Pension is very different. It is contributory in the sense of the UK tax-payer. The Additional pension is solely based on the contributions of the individual and their employer if not self-employed. That distinction is most significant.The Crown makes no attempt to discuss the distinction, and in fact at paragraph 48 state the respondent does not need to consider how the relevant government collects the funds that are distributed. They do however indicate that indifference relates to the collection method, be it tax or some otherform of compulsory acquisition of a person's income. They conclude, correctly that "true private schemes will not be caught by section 70". Isubmit in effect the Additional Pension is a form of private saving scheme as my entitlement only comes from my and my employer contributions.[20] From Mrs Sheffield-Lamb's perspective, if that submission is accepted then the other two questions of law do not need to be answered. If that is not the case, then:(a) Question One does not concern her.(b) As for Question Two, Mrs Sheffield-Lamb says the Authority did determine the failure of the Chief Executive to require her to apply for UK pension when she turned 60 was not an error of law. That finding,she says, was intrinsic to the Authority's decision to uphold thededuction and was wrong.[21] From the Chief Executive's perspective:(a) Question Two is not a valid question of law. It challenges a determination of the Chief Executive, not one of the Authority. This Court lacks jurisdiction to consider that question.(b) Question Three does not accurately represent the Authority's findings. The Authority found that the Chief Executive was entitled to deduct the lump sum payment from the Mrs Sheffield-Lamb's benefit entitlement, not from one fortnight's instalment of NZS. It also determined that the full amount of that payment ought to have been spread over the period to which it related, and deducted from benefits received during that period. The Chief Executive had effectively over paid Mrs Sheffield-Lamb. That error was in her favour, and did not need to be correct. The Chief Executive therefore proposed that the third question be amended to read:Did the Authority err in law in finding the Chief Executive was entitled to deduct the lump sum payment from [Mrs Sheffield-Lamb's] benefit entitlement?[22] The Chief Executive acknowledges that the third question necessarily involves also asking whether the Authority erred in law in finding the Chief Executive was entitled to deduct the regular payments of Mrs Sheffield-Lamb's Additional Pension (£2.15 per week) from Mrs Sheffield-Lamb's NZS.[23] The Chief Executive submits the answers to the three questions (assuming the Court decides it has jurisdiction to consider the second question) is yes, no and no.The approach to the case stated[24] In my view, the appropriate way to consider the issues raised by this appeal is first to determine whether the Authority was wrong to determine s 70 applies to the payments of Additional Pension Mrs Sheffield-Lamb received from the UK, including the lump sum payment of arrears. That is, I will address Question Three first.[25] Question One, that of error in approach, only affects the way in which the payment of arrears was dealt with. If the Chief Executive was entitled to make a retrospective adjustment with reference to that payment, his error favoured Mrs Sheffield-Lamb and the Authority's decision preserves the benefit of that errorfor her. If he was not, the question is theoretical only. I do not think therefore, that Question One needs consideration by this Court in this appeal. It would be better considered by this Court when it is a live issue.[26] If I dismiss Mrs Sheffield-Lamb's appeal against the Authority's substantive decision, I need to go on and consider the consequences, if any, of the Chief Executive not raising the issue of possible entitlement to a UK pension with her when, at the age of 60, she began receiving a weekly benefit in New Zealand.Significance of contributions[27] I have recently considered a challenge to a decision of the Chief Executive to abate NZS because of receipt of a Canadian pension.4 That challenge was based on a very similar proposition to the one Mrs Sheffield-Lamb makes when she distinguishes between the Basic Pension and the Additional Pension. That is, that s 70 should not have apply where a New Zealand pensioner qualifies for an overseas pension because of contributions that New Zealand pensioner made to the overseas scheme.[28] As the Authority recorded, it has long been held that the fact a pension is contributory does not matter where the scheme in question is a compulsory Government scheme. Ellen France J explained the position in the following way inHogan v Chief Executive of the Department of Work and Income New Zealand, another decision concerning payments of an overseas pension to a New Zealand beneficiary:5[26] Perhaps the strongest argument for the appellant that Roe is wrong as to the effect of the source of funds is in his submission as to the purpose of s 70. Namely, he says that the intention of s 70 is to prevent an individual from collecting twice from government funds, whereas under the CPP the4 Fountain v Chief Executive of the Ministry of Social Development [2017] NZHC 2144.5 Hogan v Chief Executive of the Department of Work and Income New Zealand HC Wellington AP49/02, 26 August 2002.appellant is simply recouping his/his employer's own contribution. In the end, however, I accept the respondent's submission that it is not necessary in terms of s 70 to conduct an inquiry as to how the relevant Government collects the funds and particularly whether they are from taxation or from another type of compulsory acquisition from a person's income which theGovernment chooses not to call taxation. True private savings schemes will not be caught by s 70 as a programme administered by the Government will not pay them.(Footnote omitted.)[29] As I reasoned in the Fountain decision:6[20] As can be seen, the conclusion that the source of the contribution is irrelevant is to be understood in the context of schemes made compulsory by Government legislation: that is, where contributions, being compulsory, are seen as a "type of compulsory acquisition from a person's income which the Government chooses not to call taxation". That characterisation of overseasschemes affected by s 70 is based on the 1972 report of the Royal Commission of Inquiry entitled Social Security in New Zealand. At the time, s 70 provided for the discretionary deduction of overseas pensions, without direction as to how that discretion was to be exercised. The Royal Commission recommended that s 70 should be amended by providing that the discretion should be exercised on the basis of whether or not an overseas pension or benefit was analogous to a New Zealand benefit. In reaching that conclusion, the Royal Commission reasoned:In respect of New Zealand income-tested benefits we are in no doubt that the present policy is the proper one. If the overseas pension is analogous — as it would be, for example, if it derived from a compulsory State scheme — then only one, the New Zealand benefit or the overseas pension can be received. Otherwise the overseas pensioner would be in a better positionthan the life long New Zealand, at the latter's expense.Nor are we in any doubt in respect of the New Zealand superannuation benefit, provided again that the overseas pension is analogous to a New Zealand benefit. It is true that our superannuation benefit is paid irrespective of other income, but it is also true that no one can receive both the superannuation benefit and an age, widows or invalids, or any other income tested benefit. The overseas pensioner should not be placed in a better position.Thus it is clear that a person cannot receive both a New Zealand benefit and an overseas pension which is analogous to it, or to another New Zealand benefit which a New Zealander could not receive at the same time.For a pension to be analogous to a benefit they need not be similar in every way. The analogy is not destroyed because one is financed by specific contribution and the other by6 Fountain v Chief Executive of the Ministry of Social Development, above n 4.taxation. Specific contributions to a compulsory State scheme are analogous to taxation, but contributions to an occupational superannuation scheme are not, even though they may be compulsory for employees of a particular enterprise.[21] That feature of "contributions to a compulsory state scheme" hasbeen present in all of the employer/employee funded pension schemes whose payments have been held to abate NZS under s 70. It is that element of compulsion by the Government which explains why the source of contribution is, where the other s 70 criteria are satisfied, irrelevant.(Footnotes omitted.)[30] The same analysis applies here. The contributions Mrs Sheffield-Lamb made were, as I understand matters, compulsory. Accordingly, the fact that her entitlement to the Additional Pension arises because of those contributions does not mean s 70 does not apply.[31] I therefore turn to the second issue, that of the significance of the Chief Executive not raising the issue of possible entitlement to UK pension with Mrs Sheffield-Lamb when, at the age of 60, she began receiving a weekly benefit in New Zealand.[32] Section 69G of the Act imposes an obligation on applicants for benefits to satisfy the Chief Executive they have taken all reasonable steps to obtain any overseas benefit they may be entitled to, and allows the Chief Executive to direct them to do so. As relevant, it provides:69G Reasonable steps to be taken to obtain overseas pension(1) Every applicant for a benefit under this Act or under Part 6 of theVeterans' Support Act 2014 or under the New Zealand Superannuation and Retirement Income Act 2001 shall provide to the chief executive information establishing, to the satisfaction of the chief executive,—(a) that the applicant and the spouse or partner of the applicant have taken all reasonable steps to obtain any overseas pension to which either or both of them may be entitled or that may be granted to either or both of them; and(b) that the applicant has taken all reasonable steps to obtain any overseas pension to which any dependant of the applicant may be entitled or that may be granted to any dependant of the applicant.(2) The chief executive may give to—(a) an applicant for a benefit under this Act or under Part 6 ofthe Veterans' Support Act 2014 or under the New Zealand Superannuation and Retirement Income Act 2001; or(b) a beneficiary under this Act or under Part 6 of the Veterans'Support Act 2014 or under the New Zealand Superannuation and Retirement Income Act 2001; or(c) the spouse or partner of an applicant for a benefit under thisAct or under Part 6 of the Veterans' Support Act 2014 orunder the New Zealand Superannuation and Retirement Income Act 2001; or(d) the spouse or partner of a beneficiary under this Act or underPart 6 of the Veterans' Support Act 2014 or under the New Zealand Superannuation and Retirement Income Act 2001—a written notice requiring that person to take all reasonable steps, within a period specified by the chief executive, to obtain any overseas pension to which that person may be entitled or that may be granted to that person.(4) Where a person does not comply with a notice given by the chief executive under subsection (2) or subsection (3), the chief executive may—(a) refuse to grant the benefit applied for by the applicant:(b) suspend, from such date as the chief executive determines, the benefit granted to the beneficiary until either—(i) the beneficiary provides information establishing, to the satisfaction of the chief executive, that the beneficiary and the spouse or partner of the beneficiary have taken all reasonable steps to obtain any overseas pension to which either or both of them may be entitled or that may be granted to either or both of them or, as the case requires, that the beneficiary has taken all reasonable steps to obtain any overseas pension to which any dependant of the beneficiary may be entitled or that may be granted to any dependant of the beneficiary; or(ii) the benefit is terminated under subsection (5),—whichever occurs first.[33] The Chief Executive has not explained why he did not exercise the power he has under s 69G when Mrs Sheffield-Lamb applied at aged 60 for a benefit. The Authority commented on this matter:7Ideally the Chief Executive ought to have asked [Mrs Sheffield-Lamb] to claim her United Kingdom pension when she turned 60 years of age and deducted the amount received on a weekly basis from [Mrs Sheffield-Lamb's] entitlement to benefit.[34] Implicitly, the Authority would appear to be saying that the Chief Executive was not obliged to so require Mrs Sheffield-Lamb, but would have been following best practice to do so. The reason for that would appear to be relatively obvious. An applicant may not realise they are entitled to an overseas pension or, even if they do, that receipt of that pension may affect their entitlement to New Zealand benefits. For that reason, no doubt, the application form for NZS signed by Mrs Sheffield-Lamb required her to answer the question of whether or not she had lived and/or worked in a country outside New Zealand and advised her:If you receive or may qualify for a pension from another country, this can affect how much New Zealand superannuation you are paid. We will let you know if you have to test your eligibility to an overseas pension.[35] The materials provided to me did not include the form Mrs Sheffield-Lamb filled in when she applied for the benefit she began receiving at age 60. If it did not contain similar advice then, in my view, it should have.[36] Having said that, if that question had of been asked of Mrs Sheffield-Lamb when she applied at the age of 60, and her entitlement had been established at that time, then s 70 would have applied in any event to abate the benefit she received for the five years between aged 60 and 65 from her New Zealand benefit. She is, therefore, no worse off than she would otherwise have been.Result[37] For those reasons, I dismiss Mrs Sheffield-Lamb's appeal. I note that, indoing so, I have proceeded on the basis that the contributions which entitled Mrs Sheffield-Lamb to her UK pension were compulsory. If they were not — that is7 Sheffield-Lamb v Chief Executive of the Ministry of Social Development, above n 1, at [14].if they were voluntary — then by reference to Ellen France J's reasoning in Hogan, I do not consider that s 70 would apply.8[38] I make no order as to costs, the Chief Executive not having sought such an order.________________________Clifford JSolicitors:Crown Law Office, Wellington for RespondentCopy to:The appellant8 Hogan v Chief Executive of the Department of Work and Income New Zealand, above n 5.