Morgan v Chief Executive of the Ministry of Social Development [2014] NZHC 1610 (9 July 2014)

Last Updated: 11 July 2014

IN THE HIGH COURT OF NEW ZEALAND CHRISTCHURCH REGISTRY

CIV-2013-485-005808 [2014] NZHC 1610

BETWEEN	IAN AND JEANNE MORGAN Appellants
AND	THE CHIEF EXECUTIVE OF THE MINISTRY OF SOCIAL DEVELOPMENT Respondent

Hearing:	13 June 2014
Appearances:	G M Brodie for Appellants T Hallett-Hook for Respondent
Judgment:	9 July 2014

_{JUDGMENT OF DUNNINGHAM J}

[1] The Chief Executive of Ministry of Social Development (“the Chief Executive”) seeks leave of the Court under s 12R of the Social Security Act 1964 (“the Act”) to appeal the judgment of this Court in Morgan v The Chief Executive of the Ministry of Social Development.¹

[2] The questions of law in relation to which leave is sought relate to this Court’s interpretation of s 74(1)(d) of the Act and the application of that section to applicants for Temporary Accommodation Assistance (“TAA”) under the Temporary Accommodation Assistance (Canterbury Earthquake) Programme (“TAA programme”). TAA is designed to meet up to $300 a week in rental costs incurred by Canterbury residents when they are unable to reside in their usual family home because of earthquake damage and which are not otherwise covered by insurance.

_{[3] The three questions in relation to which leave is sought are:}

¹ _{Morgan v The Chief Executive Ministry of Social Development [2014] NZHC 421.}

MORGAN v THE CHIEF EXECUTIVE OF THE MINISTRY OF SOCIAL DEVELOPMENT [2014] NZHC 1610 [9 July 2014]

(1) Did the Court err in its interpretation of s 74(1)(d) and/or the TAA programme by considering whether ownership of a property necessarily prevented an applicant from qualifying for TAA rather than whether ownership of the property the appellants applied for TAA in relation to would have prevented the appellants from qualifying for TAA, when assessing whether the appellants’ deprivation of property had “resulted” in them qualifying for TAA?

(2) Did the Court err in its application of s 74(1)(d) when it observed that qualification for a benefit is a pre-condition to the exercise of the Chief Executive’s discretion under 74(1)(d)?

(3) Did the Court err in its application of its statutory jurisdiction which only permits it to correct errors of law on a case stated appeal from the Social Security Appeal Authority (“the Authority”), by substituting its own view of how the Chief Executive’s s 74(1)(d) discretion should have been exercised for that of the Authority’s?

The primary question in relation to which leave is sought is the first question, and I

consider it more fully before turning to consider the other two questions.

Principle as to the grant of leave to appeal

[4] Under s 12R of the Act and s 144 of the Summary Proceedings Act 1957, leave is required to appeal a decision of this Court in relation to an appeal under s 12Q of the Act to the Court of Appeal.²

[5] Section 144(4) provides that this Court may grant leave:

If in the opinion of [the] Court the question of law involved in the appeal is one 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.

² On 1 July 2013, s 12R was amended to refer to subpart 8 of part 6 of the Criminal Procedure Act

2011. However, as the original appeal to the Authority was brought in 9 November 2012, prior to the 1 July 2013 amendment, this application for leave is brought pursuant to the law applicable at the time the appeal was first brought, being the procedure under s 144 of the Summary Proceedings Act 1957.

[6] It is well established that not every alleged error of law is of such importance, either generally or to the parties, as to justify the pursuit of litigation which has already been twice considered and ruled on by a Court.³ In order to be granted leave the questions advanced must have an arguable chance of success.⁴ The question of law advanced must also warrant consideration by the Court of Appeal due to its

general or public importance (or for some other reason). The Court of Appeal is not, on a second appeal, engaged in general error correction; its primary function is to clarify the law and to determine whether it has been properly construed by the Court below.⁵ The significance of the matter in relation to which leave is sought must be sufficient to outweigh the delay and costs (to the parties and the Court) of a further appeal.⁶

Arguable chance of success

[7] The first question relates to this Court’s interpretation of the threshold for exercise of the discretion in s 74(1)(d). Section 74(1)(d) of the Act provides:

... that the applicant has directly or indirectly deprived himself of any income or property which results in his qualifying for that or any other benefit or an increased rate of benefit.

Section 74(1)(d) involves two connected inquiries. The first is whether the applicant has “directly or indirectly deprived himself of income or property” and the second is whether the deprivation of property is one “which results in [the applicant] qualifying for [TAA] ...”.

[8] My decision accepted that the Morgans’ decision to purchase

22 Newcastle Street⁷ through their family trust was a deprivation of property for the purposes of s 74(1)(d), particularly having regard to the expansive interpretation

_{adapted in case law on what “deprivation” means for the purpose of this section.}⁸

³ _{Waller v Hider [1998] 1 NZLR 412 (CA).}

⁴ _{R v Mitchell CA 68/04, 23 August 2004 at [6].}

⁵ _{Waller v Hider, above n 3.}

⁶ _{Snee v Snee [1999] NZCA 252; (1999) 13 PRNZ 609 (CA) at [21].}

⁷ _{Being the property they rented and claimed TAA in respect of those rental costs.}

⁸ See, for example, Blackledge v Social Security Commission HC Auckland CP 81/87 and

AP 249/89 - 255/89.

[9] However, on the second issue, I reasoned that s 74(1)(d) requires the deprivation of property to be a determining factor that creates an entitlement to the TAA benefit. As ownership of an inhabitable property did not automatically preclude an owner from qualifying for TAA, which is not an asset or means tested benefit. The deprivation of ownership of such a property did not give rise to an entitlement to TAA. Accordingly, the decision the Morgans made to purchase

22 Newcastle Street through their family trust did not “result” in them qualifying for

TAA where they would otherwise not have.

[10] The Chief Executive argues that this approach misinterprets s 74(1)(d) and that what was required in this case was for the Authority to consider the particular application before it. In other words, the question the Authority was required to ask was whether the deprivation of the identified property meant the applicants qualified for TAA in relation to the particular application before it, where otherwise they would not have. The Chief Executive accepts that ownership of a property generally does not, in and of itself, mean an applicant is disqualified from receiving TAA, but says deprivation of ownership of the particular property in relation to which TAA is sought does prevent TAA from being granted to a particular applicant, in this case, the Morgans.

[11] The submissions on behalf of the Morgans do not directly engage on this point. Mr Brodie says instead that “the Director General has a discretion that may be exercised whenever there has been a relevant deprivation of property, whether this is a property or the property. The case does not turn on this issue. The case turns on whether the deprivation has resulted in the Morgans achieving a benefit which they would not otherwise have been entitled to”. He goes on to say “the determination of whether the deprivation has resulted in a benefit is a factual inquiry which will vary from one case to the next”.

[12] Of course, if it was simply a factual enquiry, there would be no basis for allowing an appeal in these circumstances. However, those submissions do not respond to the interpretation point being advanced on behalf of the Chief Executive. That point is whether s 74(1)(d) should be interpreted generally, so that the enquiry is whether, by depriving themselves of ownership a second property, the applicants

qualify for TAA, or whether it should be interpreted specifically, so that the enquiry relates to whether they have deprived themselves of ownership of the particular property they are renting, and so qualify for TAA in respect of that property’s rental.

[13] I consider that the determination of this issue is a question of interpretation, which has application beyond the Morgans’ personal circumstances and therefore is a question of law.

[14] I also accept that the Chief Executive has an arguable chance of success on the first alleged error of law.

Is the error in this case a matter of public importance?

[15] The more problematic issue is whether this is a question of general or public importance which is sufficient to justify the additional cost and delay of a further appeal. It appears that the difficulties raised by my interpretation are only relevant to the TAA programme. Other benefits administered by the Chief Executive are means or income tested, so there is no difficulty created whether the test is applied as a general threshold test (as I have done), or an application specific test as the Chief Executive argues for. I therefore need to determine the public importance of clarifying this issue in relation to the TAA programme.

[16] I was advised that the current version of the TAA programme is scheduled to expire on 1 March 2015, although consideration is being given to an extension. Mr Hallett-Hook, counsel for the Chief Executive, also advised that, prior to my decision, the Authority had adopted a practice of declining applications for TAA to reimburse rent paid for properties owned by a trust or company that was related to the applicant. To date this had involved declining TAA applications in respect of

approximately 49 properties.⁹ Mr Hallett-Hook also noted that on the same day as

its decision in relation to the Morgans, the Authority dismissed two other appeals against decisions to decline TAA where the rented property was owned by a trust that

_{was related to the applicant.}

9. Comprising 28 properties owned by a related trust and 21 properties owned by a related company.

[17] Mr Hallett-Hook said the consequence of my decision would be to open “a significant loophole in the scheme of the TAA programme” as it would be possible for a person to move into a property they own, transfer the property into a trust or another entity they control, and thereby qualify for TAA without any ability to question whether TAA should be granted in these circumstances. While acknowledging that it was debatable whether applicants would be motivated to deliberately restructure the affairs in the way outlined above, he said it is an issue with “implications for the administration of the TAA programme that go beyond the dispute between the parties in this case”.

[18] Mr Hallett-Hook acknowledged that a further appeal would necessarily result in expense and inconvenience for the Morgans and require the allocation of further judicial resources to this matter. However, he submitted that “the public interest in clarifying whether s 74(1)(d) is applicable in relation to the TAA programme is sufficient to justify such further expense”.

[19] I accept that where a discrete point of statutory construction arises and where a number of similar cases exist or are anticipated to arise, that would favour the grant of leave.

[20] Furthermore, as was noted by Cooper J in Prasad v Chief Executive of the Ministry of Social Development,¹⁰ “cases arising under s 144 may not readily be assessed in terms of the sums of money at stake, “and” while costs considerations which will often be properly significant in deciding whether or not a second appeal should be contemplated under s 67 of the Judicature Act [they] may have lesser significance under s 144”.

[21] In the present case, there does seem to be an issue of statutory interpretation raised which might affect the position of a small, but not inconsequential, number of persons who consider they are entitled to claim TAA. Although the Morgans’ claim is for a relatively modest sum, $15,000, which on its own might not justify a further tier of appeal, the Authority is entitled to have guidance as it considers further applications over the next year as, considered in aggregate, the amounts at stake may

be reasonably substantial. Thus, while the TAA programme is of limited scope, both in duration and in geographical effect, it is not of such fleeting consequence to both applicants and the Authority, that I am prepared to rule out a further tier of appeal.

[22] I therefore grant leave to appeal on the first question of law.

Subsidiary questions

[23] The Chief Executive approached this application on the basis that the question discussed above was the primary question of law and the other two questions were subsidiary, although Mr Hallett-Hook supported leave being granted on all three saying it was “unlikely that resolution of [these issues] would materially add to time or expense of an appeal in relation to the primary question”.

[24] The second question focuses on my observation at [30] of my decision that reliance on s 74(1)(d) implicitly recognised the applicants otherwise qualified for TAA. The Chief Executive says this was inconsistent with the High Court’s earlier decision in Blackledge v Social Security Commission,¹¹ which only required a probable entitlement to be established before exercising the discretion.

[25] In Blackledge, the question being considered by the Court was whether the decision of the Commission as to eligibility for the benefit was binding on the Authority. The Court held that the Commission had not made a conclusive finding on eligibility, just that the applicants “may” be eligible, and that in any event, on a rehearing, the Authority could reach its own conclusions on eligibility.

[26] The consistent theme in Blackledge and my decision is that there simply needs to be a prima facie entitlement to the benefit before proceeding to the question of the exercise of the discretion. However, the level of rigour with which the entitlement is established is a practical question to be determined in the circumstances of an individual application and I do not consider it raises a question of law sufficient to proceed to a further tier of appeal.

[27] The third question is described as relating to my “(implied) indication at para

53-54 that, even if the Authority was correct that the section 74(1)(d) discretion was available, the authority should not have exercised this discretion to decline to grant the Morgans’ TAA”.

[28] This is neither a clear finding in this case, and, even if such a finding were made, it would be strictly obiter and involve no question of law, let alone one of general or public importance.

[29] Leave is therefore declined in respect of the second and third questions.

Outcome

[30] Leave to appeal is granted on the first of the three questions set out in [3]

above.

[31] Costs are reserved.

Solicitors:

G M Brodie, Barrister, Christchurch

Crown Law, Wellington