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Chief Executive of the Ministry of Social Development v Broadbent [2019] NZCA 201

31 May 2019

Decision

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Summary

Appeal dismissed. Question of law. No order as to costs.

Statutes – interpretation.

Mrs Broadbent applied to the Chief Executive of the Ministry of Social Development (the Chief Executive) for an additional subsidy to reduce her contribution to the cost of her residential care. The Chief Executive conducted a means assessment and found that Mrs Broadbent did not qualify for this additional subsidy because, by transferring most of her and her late husband’s properties to trusts, she had deprived herself of income from those assets that would have been available to meet the costs of care. The Chief Executive considered he was entitled to disregard these transfers when calculating Mrs Broadbent’s income.

On appeal, the Social Security Appeal Authority (the Authority) upheld the Chief Executive’s assessment. On further appeal to the High Court on a question of law, Katz J reversed the Authority. The Chief Executive appealed to this Court.

Can the Chief Executive include any income capable of being derived from gifted assets valued below the permitted threshold in a person’s means assessment under ss 147 and 147A of the Social Security Act 1964 (the Act)? Held; no. The natural inference from the employment of “gift” in the Social Security (Long-term Care) Regulations 2005 is that if it relates to property capable of earning income, the gift will include its income earning potential. There is no particular reason to set that natural inference aside when applying s 147. Where, as in Mrs Broadbent’s case, the property is sold at fair value, there cannot have been a deprivation of its potential income because the income stream has also been sold for fair value as part of the price of the property.

Observation: The Authority proceeded on the premise that it was the assets formerly owned by Mrs Broadbent and her late husband that were gifted to the relevant trusts. In the High Court, Katz J was not called upon to answer that proposition. On the facts before this Court, the position is that the actual property Mrs Broadbent deprived herself of was in fact the principal of the forgiven loans used by the relevant trust to purchase those assets i.e. the right to repayment of that principal and not the trust’s assets themselves. This Court considered how to approach this issue and held that the best practical approach was to answer the question of law as posed. Issues of the status of the residual principal will need to be reconsidered.