CHHIMA V WINZ HC AK CIV-2004-485-1761

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