[2015] NZSSAA 064 Reference No. SSA 054/13 IN THE MATTER of the Social Security Act 1964 AND IN THE MATTER of an appeal by XXXX of XXXX

against a decision of a Benefits Review Committee

BEFORE THE SOCIAL SECURITY APPEAL AUTHORITY Ms M Wallace - Chairperson Mr K Williams - Member Lady Tureiti Moxon - Member HEARING at AUCKLAND on 5 December 2013, 14 May and 5 July 2014 APPEARANCES Claire Watkins for the appellant Mr C Howard for the Chief Executive of the Ministry of Social Development

DECISION

Introduction

[1] The appellant appeals against a decision of the Chief Executive upheld by a Benefits Review Committee to establish and recover overpayments of Domestic Purposes Benefit, Accommodation Supplement, Disability Allowance, Special Benefit, Temporary Additional Support and Special Needs grants, paid in respect of the period 1 April 2005 to 11 July 2010.

[2] On 14 May 2014 the amount of the overpayment was assessed as being $117,919.32, made up as follows:

Domestic Purposes Benefit (sole parent) 01/04/05 – 11/07/10 $67,246.07

Accommodation Supplement 01/04/05 – 11/07/10 $31,130.14

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Disability Allowance 29/05/06 – 11/07/10 $9,165.81

Special Benefit 01/04/05 – 01/06/08 $7,394.14

Temporary Additional Support 04/06/09 – 03/02/10 $2,176.66

Special Needs Grant 09/01/06 – 15/07/08

$117,919.32

$ 806.50

[3] The key issues in this case are:

(i) Whether the Ministry’s method of calculating the appellant’s income by reference to her spending is correct.

(ii) Whether or not the spending (or part of it) was derived from borrowing and should not therefore be treated as income.

(iii) Whether or not the debts have been established correctly.

(iv) Whether or not the debts should be recovered.

Background

[4] The appellant is the mother of two dependent children now aged 13 and 14 years.

[5] During the period relevant to this appeal, the appellant was in receipt of Domestic Purposes Benefit and from time-to-time received other assistance pursuant to the Social Security Act 1964. She also had some part-time work as a musician.

[6] The appellant moved from Christchurch to Auckland in 2005. Initially, she rented a home in Auckland but Ministry computer notes indicate that by 12 May 2005 she had purchased her own home at 1 XXXX Road. Her home in Christchurch was purchased from her by her mother for $350,000, although it seems that final payment was not made until August 2006. In October 2005, this Auckland property was sold and she purchased a property at 25 XXXX Road. We do not know the purchase price of XXXX Road, but the valuation for bank loan purposes was said to be $615,000.

[7] Early in 2010, 25 XXXX Road was sold for approximately $775,000 and the appellant moved to 16 XXXX Street, XXXX, for which she paid approximately $800,000. This property was sold for $1.2 million in 2012. The appellant then purchased a more modest property at XXXX Street.

[8] The Authority understood at the hearing of this matter that each of these properties was sold following improvements being made by the appellant. However, following the hearing, in response to a question from the Authority as to which bank

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account the funds for renovations had been drawn from, the appellant advised that she did not renovate any property until she moved to XXXX Street.

[9] In 2010, an allegation was made to the Ministry that the appellant was buying and selling houses and that she was receiving additional assistance from her parents. An initial investigation by the Ministry found that over the period 2005 to February 2010 some 140 deposits from unidentified sources, amounting to $181,000, had been paid into accounts operated by the appellant.

[10] Mr Hodgson, a financial analyst employed by the Ministry, carried out an analysis of the appellant’s spending on living costs or personal spending, from seven accounts used by the appellant to meet her expenses. This indicated that the appellant had substantial spending in excess of her income from known sources, such as benefit.

[11] The accounts included in Mr Hodgson’s analysis were as follows:

● XXXX ASB joint account ZZZZ (ASB joint account).

● XXXX ASB Omni account ZZZZ (ASB Omni account).

● XXXX REB 01 account – ZZZZ (REB 01 account).

● ASB Visa account ZZZZ.

● ASB Mastercard account ZZZZ.

● ASB bank cheque account XXXX Records ZZZZ.

● ASB bank business saver account XXXX Records ZZZZ.

[12] From these accounts, Mr Hodgson has added up what appears to be personal spending, including bank loan repayments, bank fees, telephone and motor vehicle expenses, purchases for food, spending at cafes and the like. The difference between the appellant’s spending and her income from known sources has then been treated as her chargeable income for benefit purposes. Mr Hodgson has not made a definitive analysis of the source of the funds for the appellant’s spending.

[13] A substantial portion of the deposits into the appellant’s account came from ASB account number ZZZZ (Fastsaver ZZZZ account). The appellant has provided evidence that this account was held in the name ‘Mrs XXXX and Mr XXXX’, 25 XXXX Road, XXXX, Auckland. This account is not included in Mr Hodgson’s analysis and statements for that account have not been made available to the Authority.

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[14] Mr Hodgson’s original assessment was amended following a meeting with the appellant in February 2014. Mr Hodgson gave evidence that he believed at the end of this meeting that the appellant’s concerns about the calculation of her spending had been met and that the remaining issue was whether or not the appellant’s spending was funded from borrowed money or from income.

[15] Following the February 2014 meeting, Mr Hodgson assessed the appellant’s chargeable income as follows:

For the year ending 31 March 2006 $23,864

For the year ending 31 March 2007 $61,375

For the year ending 31 March 2008 $72,662

For the year ending 31 March 2009 $45,174

For the year ending 31 March 2010 $47,604

Total $250,679

[16] The appellant’s benefit entitlements were reviewed on the basis of Mr Hodgson’s assessment of her chargeable income. This resulted in the assessment of the overpayments to be $117,919.32.

[17] The appellant’s primary position is that her spending in excess of income was funded from borrowed money from her mother, with a further amount being derived from bank loans. She says she also used credit cards extensively. She submits, relying on the High Court decision in Director-General of Social Welfare v K & M1

Decision

that spending derived from loans should not be classified as income. She also submits that the income and expenses associated with her music business should not have been included in the assessment. The appellant has produced her own charts derived from an excel spreadsheet in which she has endeavoured to analyse her spending and the source of her spending.

[18] At the outset, it is appropriate to consider the purpose of the Social Security Act 1964 as set out in s 1A of the Act. The purpose includes:

(b) to enable in certain circumstances the provision of financial support to people to help alleviate hardship:

1 HC, Wellington AP255 95, 7 February 1997.

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(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 available to them before seeking financial support under this Act; …

[19] Given these objectives, it is unsurprising that the definition of “income” contained in s 3 of the Act differs from the definition contained in income tax legislation and is wider than that definition. In particular, the definition of income:

(a) any money received or the value in money's worth of any interest acquired, before income tax, by the person which is not capital (except as hereinafter set out); and

(b) includes, whether capital or not and as calculated before the deduction (where applicable) of income tax, any periodical payments made, and the value of any credits or services provided periodically, from any source for income-related purposes and used by the person for income-related purposes; …

[20] Section 3 also provides a definition of “income-related purpose” as follows:

income-related purpose, in relation to any person, means the purpose of—

(a) replacing lost or diminished income; or

(b) maintaining the person or a member of his or her family; or

(c) purchasing goods or services for the person or a member of his or her family, being goods or services of a kind that are commonly paid for from income; or

(d) enabling the person to make payments that he or she is liable to make and that are commonly made from income.

[21] It is only the definition of “income” contained in the Act that we are concerned with. The definition of ‘income’ in other Acts or used in other disciplines is not generally relevant. The High Court has previously found that the wider definition contained in s 3 “reflects that payment of benefits and the collection of taxation are at opposite ends of the spectrum”.2

Mr Hodgson’s analysis of the appellant’s income

[22] Mr Hodgson’s analysis of the appellant’s ‘income’ is based on the appellant’s personal spending. In the year 1 April 2005 to 31 March 2006 he has calculated the appellant’s personal spending or drawings to be $10,591.02 from the ASB joint account plus $11,847.89 from the ASB Omni account. It is clear from the bank statements for both of these accounts that the payments included in his calculations were for personal spending; for example spending on babysitting, lawnmowing, food, cafes, osteopaths,

2 Carswell v Director-General of Social Welfare HC, Christchurch AP132/98, 14 December 1999,

Chisholm J.

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Animates, Video Ezy, school fees and the like. His analysis does not include capital items such as a payment for the deposit on the purchase of a house. In calculating these figures, Mr Hodgson has removed from his analysis items which the appellant has identified as being her mother’s spending. Spending from an ASB Visa card of $1,450.92 and an ASB Mastercard of $400.75 has been added, to give a total personal spending figure of $24,381 (see page 2 of Exhibit A). Further amounts of $510 for bank fees and loan repayments of $9,054 have been added. The loan repayments were periodic payments made by the appellant in relation to the mortgage over her house. Loan repayments are generally income-related expenses normally paid from income.

[23] In addition an amount of $3,058 for telephone expenses and $2,581 for motor vehicle expenses has been included, giving total expenditure for the year of $51,851.

[24] To these amounts, Mr Hodgson has added performance income and deducted business expenses. The effect of deducting the appellant’s business expenses is in the appellant’s favour. Normally losses in one stream of income are not offset against positive income in other streams when calculating income for the purpose of determining social security benefits.

[25] After deducting the appellant’s income from known sources, including her social security benefit and family support, it has been assessed that the appellant spent $23,864 over and above her income from known sources.

[26] On behalf of the Chief Executive, it is submitted that this amount should be considered as being the appellant’s chargeable income in assessing her entitlement to benefit for the year ending 31 March 2006, on the basis that the appellant was able to fund this spending from a source unknown or not declared to the Ministry.

[27] A similar exercise has been carried out in each of the following years. In the year 1 April 2006 to 31 March 2007, an amount of $27,042 is included for loan repayments in respect of the loan on 25 XXXX Road. The amount comprises regular periodic payments, not large capital repayments.

[28] There are three amounts for loan repayments in the period 1 April 2007 to 31 March 2008; namely a repayment of $9,977 on the 91 loan account and $9,978 on the 93 account. These two repayment amounts were derived from regular periodic payments. In relation to the 92 loan account, an amount of $11,344 is recorded as having been repaid. Part of this repayment was a lump sum of $10,000 paid on 11 October 2007. The narrative in the bank statements suggests that this was a transfer rather than a deposit. The appellant says that the source of the payment was a personal

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joint account held by her mother and her stepfather. There was nothing untoward about this, as her mother and her stepfather were joint owners/guarantors of the property. We accept that explanation. For that reason we do not consider that the lump sum payment of $10,000 should be regarded as spending by the appellant which indicates a source of income in excess of her known sources of income. Accordingly, the figure adjusted for personal spending for the year ending 31 March 2008 is to be reduced by $10,000. This reduces the appellant’s chargeable income to $62,662 for that year. It will not have any impact on the appellant’s entitlement to benefits in the year concerned.

[29] In the year ending 31 March 2009, the Ministry’s calculation of the appellant’s spending in excess of income includes a figure of $20,010.20 in respect of a repayment of the 91 account loan on 25 XXXX Road. This repayment figure is derived from regular periodic payments and we therefore consider its inclusion is correct. The figure of $875 in respect of the 92 loan account repayments is also derived from periodic payments.

[30] In relation to the year ending 31 March 2010, the Ministry noted certain corrections to its figures. The corrected figures resulted in spending from unknown sources amounting to $47,604.

[31] The appellant submits that “the total of outgoing transactions from an individual’s account are not considered to be income under any accounting methodology”. She says the Ministry’s approach of calling what she spent as “chargeable income” is wrong. She says that personal spending or outgoing transactions, do not equal the definition of “income” under the Social Security Act 1964.

[32] The Social Security Act 1964 defines what constitutes income but it does not specify how a person’s income is to be quantified. Where a beneficiary operates a number of different bank accounts, and mixes personal and business spending (for example by using a business account for personal spending or personal account for business spending), and receives multiple deposits into their accounts from an unknown source or sources, it may well be that to quantify income it is necessary to quantify the person’s spending. There is nothing in the Social Security Act 1964 which prevents the Ministry taking the approach adopted by Mr Hodgson. It is a method of calculating income used by the Inland Revenue Department on occasions when it is difficult to ascertain a person’s income.

[33] To some extent, of course, such calculations represent an estimate more than a precise determination of income, without input from the beneficiary. As a result of her representations at the meeting of February 2014, Mr Hodgson made substantial reductions in the assessed figures. In the years ending 31 March 2006, 2007 and 2008

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he reduced his estimate of the appellant’s spending by more than $20,000 in each year. Moreover, we note that some of his coding seems to be generous to the appellant – for example donations to Greenpeace are coded as business expenses. The appellant had the opportunity to have input into Mr Hodgson’s analysis on more than one occasion. The hearing itself was also an opportunity for the appellant to directly challenge the inclusion of any specific items included in Mr Hodgson’s compilation of the appellant’s spending.

[34] The appellant did not attempt to dissect or directly challenge Mr Hodgson’s analysis. Instead, she presented her own analysis. She says the purpose of her analysis is to accurately represent her financial activity to the Authority. The appellant says that she has been able to categorise whether a receipt was from a loan from her mother, proceeds of sale of a capital asset, a gift, and so forth. Accordingly, her coding reflects assets and liabilities, capital and income transactions. We understand it is particularly intended to demonstrate where her spending came from. She analyses her spending in excess of known income to be $18,016.72 in the year ending 31 March 2006, $14,396.85 in the year ending 31 March 2007, $17,258.79 in the year ending 31 March 2008, $12,228.20 in the year ending 31 March 2009 and $33,755.25 in the year ending 31 March 2010; a total of $81,257. There is no detailed transparent explanation of her spending figures or why her spending figures differ from Mr Hodgson’s. At the hearing of this matter she provided printouts of her analysis. In May 2015 she provided the electronic version of the excel spreadsheets on which her charts were apparently based. Her Appendix A exhibit 9 gives a global amount for spending called ‘Reb out flow’. There is no breakdown of this figure which would allow the Authority and the Ministry to check her figures against the bank statements.

[35] We now understand from the appellant’s response to a question from the Authority, that she has excluded from her analysis the payments made from the two credit cards and the financial information taken from the XXXX Records accounts which were included in Mr Hodgson’s analysis.

[36] The appellant submits that spending on credit cards, spending derived from bank loans, and the XXXX Records bank statements should be removed from Mr Hodgson’s analysis. Spending derived from money received from her mother should also be removed from the assessment because this money was lent to her by her mother.

The nature of the funds received from appellant’s mother

[37] The appellant says that the main source of funding for her spending in excess of benefit is the various deposits from funds belonging to her mother (Mrs XXXX).

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[38] The issue is whether the money received from the appellant’s mother was by way of a gift or loan. We note the following:

(i) There was no documentation of any loan by Mrs XXXX to the appellant prior to the Ministry’s investigation.

(ii) No record of the amount of the loan was kept other than the record of transfers contained in the bank statements. The deposits to the appellant’s accounts were not made in a small number of lump sum payments. Rather, the money was transferred into the appellant’s account by the appellant personally, in amounts ranging from a few hundred dollars to a few thousand dollars. There are many such payments.

(iii) The evidence is that there was no firm date for repayment of any loan. Repayment of the advances was not made when the appellant sold 25 XXXX Road. Mrs XXXX’s letter of September 2010 suggests that any loans would not be repaid until the appellant was in a suitable financial position.

(iv) There has been considerable variation in the amount that the appellant and her mother have said was borrowed by the appellant from her mother, and other explanations about the alleged ‘loan’:

(a) An explanation provided by the appellant in September 2010 suggests that a total of $123,663.98 had been advanced by Mrs XXXX by way of personal loan. An accompanying letter from Mrs XXXX makes no reference to a precise figure but simply states that the loan would be repaid on the sale of the appellant’s house, or when she was in a better financial position or the children had grown, whichever came first.

(b) In July 2012 the appellant’s mother wrote to the Ministry advising that “my loan to XXXX constitutes approximately $120,000 – about $40,000 of which are business loans to XXXX Records”.

(c) In a document apparently provided by the appellant to the Benefits Review Committee (at page 235 of the s 12K Report) the appellant lists “Loan XXXX $47,284.55” and “Loan XXXX $80,428.66”. “Repayments $4,401.02”.

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(d) Subsequently, in a letter dated 11 March 2013 Mrs XXXX advised the Ministry that the appellant’s debt to her had been paid in full out of the proceeds of sale of the XXXX Street property. This payment was for $130,000.

(e) At the hearing of this matter the appellant produced a document (Exhibit 8) which sets out a calculation of the amount owed to her mother. This suggests that a total of $199,690 was advanced to her by her mother. Of this, $41,925 was repaid in the period with which we are concerned and a further $130,000 was repaid in 2013, leaving $27,765.17 outstanding. While the excel spreadsheet sets out the claimed repayments, we are unable to readily reference the repayments to the bank statement entries as there are no dates in the spreadsheets. It is difficult to understand how a beneficiary needing Special Benefit and Temporary Additional Support to pay her basic living costs could repay $41,000 in ‘loans’ from her family. The appellant says the payments were at least in part from bank loans. There is one payment of $5,000 in 2006 to the Fastsaver XXXX account which was paid from a bank loan. However, since the appellant continued to regularly access the funds in the Fastsaver XXXX account it is not clear whether this was a repayment or deposit for future use.

[39] The appellant says that further amounts were repaid from borrowed money. In the year ending 31 March 2009, $8,400 was repaid and in the year ending 31 March 2010, $8,390 was repaid from borrowed money.

[40] Whether these were simply funds repaid into the Fastsaver XXXX account for reuse by the appellant (perhaps for renovation costs) is not clear. Bank statements for the Fastsaver XXXX account have not been provided.

[41] The appellant also claims to have made repayments of the alleged loan from bank loans made in 2005 of $40,000.90. We are not satisfied that the amounts appearing in the appellant’s accounts in August and September 2005 were loans for the reasons set out in paragraphs [56]-[63] of this decision. Moreover, the appellant has also told the Authority that these particular funds were a deposit on 25 XXXX Road.

[42] The conclusion to be drawn from this information is that there was no proper record of the loan kept. Neither the appellant nor her mother appear to know the precise amount of the loan. Nor was there was any clear repayment agreement. The

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suggestion by the appellant that she stills owes her mother $27,765.17 must be contrasted with her mother’s declaration that the loan has been repaid in full.

[43] In addition to the above information, we note Mrs XXXX is the trustee of a trust. The appellant and her brother are the beneficiaries of the trust. The appellant’s interest in the trust was apparently adjusted to take into account the payments made to the appellant. On 22 June 2006, Mrs XXXX signed what is termed a “Second Restated Amendment to the Trust”. As a result of this amendment, the appellant’s share in the trust was reduced to 25% and her children were cited as being beneficiaries as to 12.5% each. The appellant’s brother’s share remained at 50%.

[44] In 2010, after the commencement of the Ministry’s investigation, a further document was signed. This is termed “Third Stated Amendment to the Trust”. By this amendment the appellant’s interest in the trust was reduced to 20% and her brother’s interest increased to 80%. Mrs XXXX has advised (in writing) that this was to reflect the appellant’s loan from the trust to ensure that, if she as trustee died and it came time to distribute the trust, her son would not be disadvantaged as a result of the previous advances to the appellant.

[45] It would not be unreasonable to infer that the appellant’s interest in the trust was reduced because her share in the Trust or her mother’s estate had already been distributed to her through the trust or was a gift from her mother. Any advance to the appellant by way of loan would have still existed had her mother passed away. There was no real need to adjust the interest in the trust if the money received by the appellant was a loan. This particular piece of evidence suggests that the payments were in fact distributions from her mother’s trust. However, the appellant denies they were distributions from the Trust. If they were distributions from her mother’s trust, they constituted income for the purpose of the Social Security Act 1964.

[46] We have not had the benefit of evidence from Mrs XXXX in person although it transpires that she was in New Zealand shortly after the hearing in July 2014. The appellant’s father gave evidence to the effect that he was familiar with the dealings between the appellant and her mother, at least while they were living in Christchurch. It transpired, however, that he did not have a great deal of contact with his former wife once she left Christchurch. In fact, Mrs XXXX has not lived in New Zealand for most of the time to which the appeal relates. We note in passing that the extensive evidence given by the appellant relating to a loan arrangement she had with her father after the Ministry’s investigation commenced was of marginal relevance in determining the nature of the payments made to her from her mother.

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[47] As previously noted, a large number of deposits into the appellant’s accounts came from the Fastsaver XXXX account in the name of her mother and stepfather. She suggests in her submissions that it was her mother, based in the XXXX, who transferred money from the Fastsaver XXXX account into the ASB joint account for the appellant’s use. This seems unlikely. There were more than 100 transfers into the appellant’s account, most of which were for less than $1,000. The pattern of transfers suggests that the appellant had the ability to draw on the Fastsaver XXXX account whenever she chose to do so. We further note that the statements for this account were sent to the appellant’s home address.

[48] Taking into account all of the above matters, we are satisfied on the balance of probabilities that the various deposits received by the appellant from her mother were gifts. Whether or not they were capital, they were periodic payments paid and used for income-related purposes and fall within the definition of “income” contained in the Social Security Act 1964. The calculation of the appellant’s income should not be reduced by the amount received from her mother.

Credit card spending

[49] The appellant’s spending through credit cards was significant. As much as $20,000 in one year. The credit card spending has been included in calculating the appellant’s income. The payments made to repay credit card debt are not. The appellant operated both Visa and Mastercard credit cards. Each card had a credit limit of $2,000. The statements relating to both credit cards do not indicate any significant increase in credit card debt over the period concerned. In short, while payments were made by credit card, the spending was funded by regular repayments. In these circumstances it is not unreasonable to include the expenditure incurred on the credit cards as personal spending for the purpose of calculating the appellant’s spending in excess of income. There are a small number of credit card repayments made with funds borrowed from a bank. This can be accounted for in the section relating to bank loans (dealt with later in this decision). The majority of repayments were made with funds apparently derived from the appellant’s mother and in particular from the Fastsaver XXXX account. We accept that the inclusion of credit card spending in Mr Hodgson’s assessment was correct.

Inclusion of XXXX Records information

[50] The appellant carries on a small business as a musician through the auspices of XXXX Records Ltd. She is the sole director, shareholder and employee of this company.

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She submits that accounts or financial statements of this company should not be taken into account by Mr Hodgson in reaching his assessment of her chargeable income.

[51] The XXXX Records bank accounts have been included in the assessment because there was a mix of business and personal expenditure through the business bank accounts, and apparently business expenditure through the appellant’s personal bank accounts and credit cards. By including the income of XXXX Records Ltd and then deducting business costs as detailed by the appellant, any miscoding of business expenditure in the analysis of personal expenditure or other bank accounts is offset. In assessing income under the Social Security Act 1964, losses from one source are not normally offset against another source. In this case, the costs associated with the business have been deducted from the appellant’s total spending. In fact, the costs associated with the business are greater than the income. If XXXX Records information is taken out of the equation, the appellant’s estimated income from spending would be higher. The appellant is not disadvantaged by this approach.

[52] We note in passing that the XXXX Records bank accounts were not in the company’s name but in the name of the appellant personally, trading as XXXX Records. Moreover, s 74(1)(d) of the Social Security Act 1964 provides that where a beneficiary has deprived herself of income or assets, the Chief Executive has a discretion to assess entitlement to benefit as though deprivation had not occurred. Electing to conduct her music business through a company was a deliberate decision on the part of the appellant. In channelling the income she earned for her efforts from her music through the company, the appellant has potentially deprived herself of income. Section 74(1)(d) enables the Chief Executive to look behind the company and treat any income received by the company as though it was the appellant’s income, less reasonable expenses incurred in earning that income.

[53] We consider that the inclusion of the business bank accounts in Mr Hodgson’s analysis was appropriate.

Bank loans

[54] In addition to the advances from her mother, the appellant says that in part her spending was funded by bank loans and that bank loans should not be regarded as income for the purposes of the Social Security Act 1964.

[55] In examining whether or not the appellant’s spending was derived from borrowing from banks, we note at the outset that deposits to purchase houses are not included in Mr Hodgson’s assessment of her spending. The funds borrowed for the deposits to

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purchase houses are therefore not relevant to Mr Hodgson’s analysis. The only borrowing relevant to the analysis is borrowing which paid to support the spending on living costs and personal spending included in Mr Hodgson’s assessment.

[56] There are two independent sources of information about the ASB bank loans available – the bank statements themselves which usually list “borrowing” at the end of the statement and the documents contained in the Ministry’s Appendix 9. These documents indicate there were loan accounts with the following numbers: XXXX 1 (this was the loan raised to purchase 1 XXXX Road; XXXX (the loan raised to purchase 25 XXXX Road). The number of this loan account later reverted to the number XXXX. The third loan number is XXXX which was a loan used primarily for the appellant’s music business.

[57] The appellant claims borrowing of $40,000.90 in 2005. She says this amount was made up of three different bank loans - $20,000.45, $10,000.45 and $10,000. She says the evidence of these loans is in the bank statements but does not specify which bank statements, nor does she supply any evidence confirming these loans.

[58] The ASB Omni statements for 2005 show a transfer of $20,000.45 into that account on 26 August 2005, with the money being transferred out on the same day. There is no indication of where this money came from or where it went to. The appellant’s loan summary says it was an ASB loan with the number XXXX and she has repeated this claim to the Authority subsequently.

[59] Two further amounts of $10,000.45 and $20,000 were transferred in on 27 August 2005 and an amount of $30,000 transferred out on the same day and into an investment account (Appendix 4, p 16). Whether the $20,000 transferred out on 26 August is the same $20,000 transferred back in on 27 August is not evident.

[60] There is no evidence on any of the bank statements included in Mr Hodgson’s analysis that this was money borrowed from the ASB bank. The bank statements list the related loan history. There is no reference to any loan accounts with the number XXXX which the appellant suggests was the number of the loan account associated with this alleged loan. In any event, the appellant acknowledges that this money was used for the deposit on a house – the purchase of 25 XXXX Road. This is not an item of expenditure included in Mr Hodgson’s analysis of the appellant’s spending. Whether the money for the deposit was borrowed or not; as it was not an item included in the spending it is not relevant in assessing the appellant’s income.

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[61] The appellant refers to a further transfer into the ASB Omni account on 27 September 2005 of $10,000, claiming this was a further bank loan with the number ending XXXX. In fact, the bank statement shows (Appendix 4, p 17) the investment account reducing from $30,000 to $20,013.67. In short, this transferred deposit seems to be from the money deposited in August.

[62] Again, there is no evidence of increased borrowing in the loan history on any of the three ASB accounts analysed by Mr Hodgson and no reference to a loan with the number ending XXXX as suggested by the appellant. Neither is there evidence of repayments of loans with those suffixes by the appellant. Moreover, a memorandum prepared by the ASB bank (Appendix 9, p 29) as part of the loan application process for 25 XXXX Road lists the “current facilities” of the three borrowers (the appellant, her mother and stepfather). There is no reference in this document to loans with the suffix XXXX or XXXX as suggested by the appellant. This document was prepared on 10 October 2005, not long after the alleged ‘loan’ money was deposited in the ASB Omni account.

[63] We are not satisfied that the appellant borrowed $40,000 from the ASB bank in 2005 to fund personal spending which has been taken into account in the Ministry’s assessment of the appellant’s chargeable income.

Borrowing 2006

[64] Both the ASB Omni account and ASB REB XXXX account bank statements evidence the appellant’s borrowing from the ASB bank. They indicate that, as at 1 December 2005, the appellant had total borrowings from the ASB bank of $330,000, this being the amount borrowed to finance the purchase of 25 XXXX Road. (Initially this was the loan account with the suffix number XXXX. It later changed to XXXX.) The bank records indicate that as a result of the payment of the balance of proceeds of sale of the appellant’s property in Christchurch of $104,000 into the account in August 2006, the appellant’s borrowing reduced to $225,000. There is no record of any increase in borrowing in this year.

Borrowing 2007

[65] The appellant took out a further loan of $20,000 in February 2007, increasing her total indebtedness to the bank at that point to $241,838.32 (the XXXX loan account). This loan was in fact deposited to the XXXX Records business’s current account. Part of this advance was transferred to the ASB joint account and used for personal spending, $2,000 went to pay a Visa card and $16,000 was transferred to the business saver account and used for business purposes.

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Borrowing 2008

[66] In October 2008, the outstanding balance of the XXXX loan account borrowed in February 2007 was reduced by $10,000. We have been told the source of this repayment was funds from the appellant’s mother and stepfather.

[67] There is no evidence of further bank borrowing to fund daily living costs until July 2008, when the statements evidence a new credit facility of $50,000 on the REB XXXX account which was drawn on regularly until March 2009 for loan repayments, rates, water rates and insurance. As at 6 March 2009 the appellant owed $25,604.76 in respect of her overdraft. There were no significant deposits to the account to reduce the overdraft other than the regular amounts deposited for mortgage and rates from the joint account.

Borrowing 2009

[68] In March 2009, the appellant refinanced. As a result of this refinancing the overdraft was repaid. A new loan totalling $36,486 was established and the appellant had an overdraft facility of $23,500. The reason for the increase from $25,604.76 to $36,486 is not apparent. There is no evidence the extra $11,000 over and above her overdraft facility was used to fund the personal spending in Mr Hodgson’s analysis. As at 6 March 2009, the appellant’s total indebtedness to the bank was $260,582, an increase of $35,000 from the point at which the Christchurch proceeds of sale were deposited to her account.

[69] For a period, the overdraft facility was not used on a regular or significant basis but in September 2009 two transfers, one of $2,000 and one of $2,500, put the account in overdraft again. The overdraft continued to increase, with the limit of $23,500 being reached in January 2010. We note in passing that the payment of $2,500 was to repay credit card debt. The pattern of debits and transfers indicates that this $23,500 was spent in the space of three months. Most of the money was spent on living expenses. Again, there were no significant or regular deposits into the account to reduce the overdraft.

Summary of borrowing

[70] In summary, there is evidence of spending from borrowed bank funds as follows:

● A loan of $20,000 in the year ending 31 March 2007.

● Overdraft spending on living expenses of $25,604.76 in the year ending 31 March 2009.

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● Overdraft spending on living expenses of $23,500 in the year ending 31 March 2010.

[71] The question which then arises is whether or not the portion of the appellant’s spending based on bank borrowing can be regarded as income.

[72] The section 3(b) definition of “income” is significant. Periodic payments of capital paid and used for income-related purposes is regarded as income for the purposes of the Social Security Act 1964.

[73] This was not unsecured borrowing as in Director-General of Social Welfare v K & M. Rather, the money spent by the appellant was money borrowed against the security of her home. Arguably, it was a mechanism for releasing capital prior to the sale of the property. In effect, by drawing down on the various loans from time-to-time, the appellant was receiving periodic payments which she apparently obtained for the purpose of living expenses and the funds were used for that purpose. Her spending suggests, bearing in mind the provisions of s 1A of the Act, she did not need the benefit assistance she was receiving.

[74] The appellant’s spending derived from bank loans arguably meets para (b) of the definition of “income” in the Act and, as such, can be regarded as “income” for the purposes of the Social Security Act 1964.

[75] Had the appellant been involved in the business of buying and selling houses, we would have had no hesitation in finding that the appellant’s spending from bank loans constituted income. However, there is insufficient evidence to satisfy us that the appellant was in such a business. The Social Security Act 1964 does not envisage beneficiaries borrowing money on the security of their home to meet living expenses. We consider that the spending derived from bank loans should not be regarded as income on this occasion. The appellant’s spending in excess of income should be reduced by the amount of the bank loans to reflect this. In particular, the income calculated by the Ministry in the year ending 31 March 2009 should be reduced by $25,604.76 and in the year ending 31 March 2010, by $23,500.

[76] In relation to the year ending 31 March 2007, the Ministry’s figures have already been reduced by the amount of business costs. Most of this spending appears to have been derived from the bank loan. To deduct both business expenses and the bank loan would be to deduct the same amount twice. If the bank loan of $20,000 is substituted for business expenses and the business expenses are taken out of the equation, the borrowed money will be accounted for appropriately.

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Summary in relation to calculation of income

[77] We are in no doubt that the money received by the appellant, from her mother or other unknown source, constituted income under the Social Security Act. It was clearly paid to and used by the appellant for income-related purposes. The question is how that income should be quantified.

[78] Mr Hodgson’s analysis is transparent and the figures used can readily be identified in the various bank statements analysed. The items of spending clearly appear to be personal spending or living costs. There is no obvious capital expenditure (such as the deposit on a house) included.

[79] Faced with evidence of a beneficiary whose financial records show she operated multiple accounts, mixed personal and business spending, that she had received significant funding from other sources, and that she was able to live beyond the means of an ordinary beneficiary, we accept that Mr Hodgsen’s approach in calculating the appellant’s spending in excess of her known income to quantify her chargeable income was an acceptable approach.

[80] In summary:

(a) The money received from the appellant’s mother was not a loan. It was gifted to the appellant and should be regarded as income.

(b) The inclusion of credit card spending and the XXXX Records’ bank accounts in the Ministry’s analysis was correct.

(c) Some of the appellant’s spending was funded from bank loans and deductions as directed should be made from Mr Hodgson’s chargeable income figures.

(d) Credit card repayments made with borrowed money are accounted for by the deduction of the full amount of the bank loans specified.

[81] The Chief Executive is directed to revise the assessment of the appellant’s income based on the Authority’s findings.

Calculation of entitlement to benefit and debt

Domestic Purposes Benefit

[82] Domestic Purposes Benefit is an income-tested benefit. Income is assessed on an annual basis for the purpose of assessing the appellant’s income. The Ministry are to

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reassess the appellant’s income based on our findings and reassess the debt of Domestic Purposes Benefit accordingly.

Accommodation Supplement

[83] The Chief Executive has a discretion to grant Accommodation Supplement pursuant to s 61EA of the Act. An overpayment of Accommodation Supplement has been established on the basis of the appellant’s income.

[84] Eligibility for Accommodation Supplement is subject to a cash assets limit of $16,100 in the case of a sole parent with dependent children. In addition, s 61EC(4) gives the Chief Executive a discretion to refuse to grant Accommodation Supplement if the applicant has not realised any assets available for her personal use.

[85] In the course of the appeal it came to light that an amount of $104,000 remained owing in respect of the sale of the house at XXXX Avenue, Christchurch after the appellant purchased a home in Auckland. This amount was not paid to the appellant until August 2006. The appellant apparently did not disclose this amount to the Ministry. In fact, computer records show that she told Ministry staff on one occasion that her equity in this property was $45,000 and on another occasion, that her equity in the property was $35,000.

[86] The Ministry has a policy of disregarding the proceeds of sale of a home pending the purchase of another home; however, it seems to us that once the appellant had purchased her first home in Auckland and began receiving Accommodation Supplement on the basis of her mortgage costs in respect of that property, it would then have been necessary for the Chief Executive to consider whether the $104,000 which remained owing in relation to the Christchurch property should disqualify the appellant from entitlement to Accommodation Supplement. It did not do so because this amount was not disclosed to the Ministry. The relevant form made clear provision for this to be disclosed.

[87] The appellant has been asked for an explanation as to why this asset was not disclosed, but a concise explanation has not been provided. We infer that the money was tied up in the XXXX Avenue property until it was sold. It may have been that s 61EC(4) applied in this instance, in which case the amount was in a form which had not been realised but was capable of being realised. It may have been appropriate to give the appellant an opportunity to realise this asset and to exercise discretion to disregard the asset for a period.

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[88] A further matter affecting the appellant’s entitlement to Accommodation Supplement is that the house at 25 XXXX Road was jointly owned by the appellant, her mother and stepfather. This was noted by the Ministry. On 5 January 2006 the appellant was questioned about this and asked to provide confirmation that her mother and stepfather “have no involvement in paying any costs towards the mortgage, rates and insurance etc”.

[89] The appellant’s mortgage costs at the time were $380 per week. The mortgage, rates and insurance were paid from the appellant’s ASB REB XXXX account. This account is in fact in the name of the owners of the house. Funds for this account came regularly from the ASB joint account. Indeed, payments into the REB XXXX account often had the notation “transfer XXXX” on them although they did not come directly from the Fastsaver XXXX account.

[90] It is something of an exaggeration to say that the appellant was solely responsible for payment of the outgoings on the house when she was routinely receiving large payments from the Fastsaver XXXX account held in the name of her mother and stepfather to meet her living costs, at least until June 2008. We further note that the $10,000 reduction in the mortgage in October 2007 was apparently made by her mother and stepfather.

[91] The third matter affecting the appellant’s eligibility for Accommodation Supplement is that the resources apparently held in the Fastsaver XXXX account could have been used to reduce the mortgage on her home rather than for living costs. The appellant’s entitlement to Accommodation Supplement would have been much reduced. In a sense it appears that the appellant had arranged her finances to maximise her benefit entitlement. Arguably, s 74(1)(d) applies in that the appellant deprived herself of an asset, namely equity in her home, by choosing to use the significant amount of money gifted to her for living costs rather than reducing the amount owed to the bank and thereby increasing the equity in her property.

[92] Taking all these matters into account, we are not satisfied that the appellant had any entitlement to Accommodation Supplement in the period to 1 July 2008. Any debt in relation to the period 1 July 2008 onwards is to be calculated on the basis of the appellant’s income. The Chief Executive was correct to establish an overpayment. The amount of the debt may need to be reassessed.

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Disability Allowance

[93] This is an income-tested benefit. The debt is to be reassessed on the basis of the appellant’s income where appropriate.

Special Benefit

[94] Special Benefit is third tier assistance directed towards alleviating hardship.

[95] Retrospectively establishing an overpayment of Special Benefit is not a simple matter because of the wide discretion surrounding the grant of Special Benefit.

[96] At the time Special Benefit was granted to the appellant (pursuant to the then s 61G of the Social Security Act 1964) the Ministerial Direction relating to Special Benefit required the Chief Executive to take into account a wide variety of factors in assessing whether or not a Special Benefit should be granted. In deciding whether or not to establish an overpayment, similar considerations will need to be taken into account.

[97] In the first instance, the decision-maker must carry out an assessment pursuant to the formula contained in the Ministerial Direction. This requires the Chief Executive to take into account the appellant’s assessable income and allowable costs.

[98] If, as a result of the assessment, it was demonstrated that an applicant had a deficiency of income over expenditure, the Ministerial Direction provides that the Chief Executive would be justified in granting Special Benefit at the lesser of the deficiency, or 30% of allowable costs if the appellant’s cash assets are less than a certain amount. The cash asset limits applicable to the appellant at the relevant time were as follows:

Period Asset limits (sole parents)

01/04/05 to 31/03/06 $1,404.94

01/04/06 to 31/03/07 $1,449.34

01/04/07 to 31/03/08 $1,487.46

01/04/08 to 31/03/09 $1,534.76

01/04/09 to 31/03/10 $1,586.63

[99] What constitutes “cash assets” is defined in the Ministerial Direction. The Direction provides that it means assets of the beneficiary that can be readily converted into cash and includes:

(b) Bank accounts, including fixed and term deposits with any bank, friendly society, credit union, or building society;

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(c) Money invested with or lent to any bank or other financial institution or other person;

(d) The net equity held in any property or land not used as the person’s home;

[100] The appellant had the following amounts in the three bank accounts analysed at the times she made application for Special Benefit or her Special Benefit was renewed. (The figures we have used are the figures in the accounts at the end of the day.)

24/03/05 ASB joint bank account only $1,518.11

04/01/06 Three bank accounts $2,855.45 based on estimated amount in ASB joint account as at 31/12/05 as January statement missing

08/06/06 $2,290.62 (three accounts)

24/02/07 $2,505.09 (three accounts)

27/08/07 $1,105.98 (three accounts)

08/02/08 $ 676.14 (three accounts)

[101] In addition, she apparently had the interest in the Christchurch property in the period May 2005 to August 2006 of approximately $104,000 which fell within the definition of cash assets for Special Benefit purposes.

[102] The appellant says that the monies accumulated in her various accounts were to pay anticipated bills and automatic payments such as her mortgage, rates and other regular payments.

[103] The High Court has considered the issue of whether or not debts should be deducted from assets to ascertain whether an applicant’s cash assets exceed the permitted limit in a case involving Accommodation Supplement. The High Court found, in Schoonderwoerd v Chief Executive of the Department of Work and Income3

“the definition of cash assets in s 61E does not allow for the deduction of debts owed. If the legislature had intended that cash assets were to be determined on a net basis, then the provision would specifically have required the deduction of liabilities in determining the cash assets of an applicant for an Accommodation Supplement.”

at para [22]:

[104] The definition of “cash assets” contained in the Ministerial Direction relating to Special Benefit differs from the definition in s 61E of the Social Security Act 1964 relating to Accommodation Supplement, but as with the definition of “cash assets” in the

3 HC, Auckland CIV-2002-404-117, 16 June 2003.

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definition relating to Accommodation Supplement, there is no reference to “net” cash assets. Nor is there any provision which allows for future liabilities to be deducted. This is perhaps because the existence of cash assets does not in fact prevent the payment of Special Benefit. However, where they exist to the level specified, the decision-maker will be more reluctant to grant Special Benefit.

[105] We are satisfied that the definition of cash assets in the Ministerial Direction relating to Special Benefit does not require us to deduct debts or future liabilities from cash assets. That funds were being accumulated to meet mortgage payments is, however, something which must be considered carefully in exercising discretion to grant or decline to grant Special Benefit. We further note that, particularly in the period 2005 to 2007, the bank statements do not suggest that funds in the three analysed bank accounts would at any time be exhausted by the payment of essential costs such as mortgages, rates and insurance. Even deducting these costs from the appellant’s accounts would have left the appellant with cash assets which, in some instances, exceeded the limit.

[106] In addition, the appellant apparently had free access to funds in the Fastsaver 894 account. There are many instances of money being drawn from this account whenever the three accounts analysed had a low balance. As previously noted, it is reasonable to infer that it was the appellant (rather than her mother) who made the transfers.

Exercise of discretion

[107] Regardless of whether the appellant had cash assets, the Chief Executive must still exercise discretion to grant or refuse to grant Special Benefit.

[108] The Ministerial Direction relating to Special Benefit gives the decision-maker guidance about the wide variety of factors to be taken into account in assessing whether or not the discretion to grant Special Benefit should be exercised. These include the general principles in clause 1 that:

● The benefit should not be granted unless the applicant would suffer financial hardship;

● The applicant’s deficiency of income over his or her expenditure and commitments is reasonably substantial;

● The deficiency is likely to continue for a period that justifies Special Benefit being granted;

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● Special Benefit should be considered only in respect of costs that are essential and not reasonably avoidable; and

● Consideration should be given to the ability of the applicant to meet the deficiency from the applicant’s own resources or assistance available from other sources.

[109] In addition, the decision-maker is required to have regard to the matters contained in clauses 3.3(a)-(h) of the Direction. These include: whether or not the applicant has any special or unusual financial expenditure; whether the applicant has special or unusual reasons for any expenditure which has caused or contributed to his or her deficiency; the nature and likely duration of the financial difficulty; the age and health of the applicant; the ability of the applicant to improve his or her financial situation; the causes of the applicant’s financial difficulty; the extent to which the basic necessities of life would be at risk; and any other relevant matters.

[110] We note that there were instances where the appellant sought hardship assistance such as Special Benefit and Special Needs grants, and on the same day as she was seeking this assistance she would move money into her account from the Fastsaver 894 account. We are in no doubt that had the Chief Executive been aware of the substantial amounts the appellant was receiving from this account, her substantial spending in excess of benefit, her spending on non-essential items, the balances in her bank accounts and in the period prior to August 2006, and the $104,000 owing in respect of the Christchurch property, the appellant would not have been granted Special Benefit at any of the times that it was granted or renewed. That the appellant was able to purchase a more expensive property while she was in receipt of Special Benefit in 2005, and the evidence of her spending contained in the bank statements, suggests that the appellant was not working to reduce her costs at any time and also suggests that the appellant was not a person in need of Special Benefit. We are not satisfied that the appellant would have faced hardship if the assistance had been declined. This is because the appellant had free access to what was apparently a substantial pool of money held in the name of her mother and stepfather. Faced with this information, it would have been difficult for the Chief Executive to conclude that he would be justified in granting Special Benefit to the appellant.

[111] Once the Chief Executive became aware of the existence of the appellant’s cash assets and the receipt of funds from her mother, it was appropriate to review the appellant’s entitlement to Special Benefit pursuant to s 81 of the Act, conclude that Special Benefit should not have been granted, and establish an overpayment.

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[112] We are satisfied that the Chief Executive was correct to establish an overpayment of Special Benefit in respect of the period 1 April 2005 to 1 June 2008.

Temporary Additional Support

[113] The appellant received Temporary Additional Support between 4 June 2009 and 3 February 2010 amounting to $2,176.66.

[114] Section 61G of the Act as it is now, provides that the purpose of Temporary Additional Support is to provide temporary financial assistance within the prescribed limits as a last resort to alleviate the financial hardship of people whose essential costs cannot be met from their chargeable income and other resources, while ensuring that people seeking or granted that assistance take reasonable steps to reduce their costs or increase their chargeable income.

[115] Section 61G(2) provides that an applicant is eligible for Temporary Additional Support if their chargeable income is less than their essential costs and they have cash assets of no more than the prescribed amount, and they meet any other prescribed criteria. Section 61G(5) and (6) provide for certain circumstances where the Chief Executive may refuse to grant Temporary Additional Support, even if the appellant meets the specified criteria.

[116] We note that it was while she was in receipt of Temporary Additional Support that the appellant arranged to sell 25 XXXX Road and purchase a property of similar value at XXXX Street, rather than use the substantial profit she made on the sale to downsize and reduce her costs. She also apparently had a trip to Canada and to Queenstown for skiing while she was in receipt of Temporary Additional Support. The appellant’s entitlement to Temporary Additional Support will need to be reassessed, based on the reduced income as directed earlier in this decision.

Special Needs Grants

[117] The Authority does not have the various applications for Special Needs Grants before it, but has computer notes made at the time by the case managers who dealt with the appellant. They record various explanations by the appellant for her applications.

[118] Special Needs Grants are made pursuant to the welfare programme known as the Special Needs Grant Programme. Grants are both income-tested and asset-tested. The debts in relation to Special Needs Grants have been established on the basis of the appellant’s excess income; however, she also had excess cash assets. In relation to the

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applications for food grants, the Programme requires that the applicant have no cash assets. In relation to applications for other types of assistance, the Programme requires that the applicant’s cash assets not exceed the amount set out in Schedule 31 of the Act. The limits are the same as those for Special Benefit, set out at paragraph [98] above.

[119] The provisions in the Programme relating to food grants also require the Chief Executive to be satisfied that:

● the applicant or their immediate family had an immediate need to purchase food; and

● the applicant had no resources to meet that need and would otherwise have to rely on a food bank to meet that need; and

● that need or the lack of resources to meet it was caused by an essential expense which had to be met and which left insufficient money to buy food.

[120] The definition of “cash assets” relevant to Special Needs Grants is contained in Clause 3.1 of the Programme. It includes assets that can be readily converted into cash and bank accounts. The appellant submits that money borrowed cannot be regarded as a cash asset. We agree that an overdraft facility or credit card cannot be regarded as a cash asset, but where a beneficiary has money sitting in a bank account available to be spent on an immediate need, we consider that these funds should be regarded as a cash asset.

Application for Special Needs Grant for medical fees – 29 September 2006

[121] At the time of this application, the appellant advised that she was not currently receiving assistance with counselling fees and could not afford to pay her outstanding account with the doctor of $126.50. She was granted non-recoverable assistance of $126.50.

[122] At the time of her application, the appellant had $3,252.44 in the ASB joint account. A few days after her application, on 1 October 2006, she received a transfer into the account of $3,454, giving a total balance of $6,216.22. In addition, on 29 September 2006 the ASB REB 01 account had a balance of $747.05 and the ASB Omni account had a balance of $111.20. It appears that she went on a ski trip to Queenstown and Christchurch on 1 October 2006.

[123] In summary, at the date of her application the appellant had $4,110.69 in her bank accounts. Her cash assets exceeded the limit for a Special Needs Grant. The amount

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held was well in excess of the amount needed to meet her mortgage payment for a month.

[124] There was no evidence that the appellant did not have sufficient money to pay her doctor’s bill.

[125] This is a striking instance of the appellant’s willingness to mislead the Ministry as to her true financial circumstances. The Chief Executive was wholly justified in making this previously non-recoverable grant, recoverable.

Application for Special Needs Grant for food – 23 August 2007

[126] The explanation recorded for this application is that the appellant had spent her benefit payment on her mortgage payments, bills and counselling fees and had no money for food until the next week. She was granted $150 for food.

[127] The ASB joint account shows that at the end of the day on 23 August 2007, the appellant had $522.48 in the account. She had transferred $1,000 into the account from the Fastsaver 894 account earlier in the day. The ASB REB 01 account had a balance of $566.78. The ASB Omni account had $4.93 at the end of the day, down from $535.14 at the start of the day. The appellant’s claim that she did not have funds to purchase food was patently untrue. She had cash assets in her account both at the start and end of the day.

[128] The Chief Executive was wholly justified in reversing the decision to make this grant non-recoverable, and instead make it recoverable.

Application for Food Grant – 29 February 2008

[129] The appellant advised that she had paid other bills such as the phone and power, resulting in her need for a food grant. Her bank accounts show she had spent $81.76 at a food supplier two days before, on 27 February 2008. The appellant was overdrawn $131.41 in the ASB Omni account. The balance in the ASB joint account was $1,067.10, she having transferred $1,000 from the Fastsaver 894 account. Her total bank balance at the end of the day was $1,887. She made three purchases for food during the day from the joint account ($48.86, $16.95 and $47.42). We are not satisfied that the appellant had either an immediate need to purchase food or no resources to meet that need which meant she would otherwise have to rely on a food bank to meet that need.

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[130] When the Chief Executive became aware of the appellant’s correct situation, it was appropriate to make the grant recoverable.

Application for Food Grant – 13 March 2008

[131] At an appointment on 13 March 2008, the appellant advised the case manager that her Special Benefit had been cancelled the previous month and she was having difficulty coping with bills. She advised that she was behind with her other costs, and asked for a food grant. The appellant’s ASB joint account showed that at the beginning of the day on 13 March 2008 the appellant had $341.09 in that account. She spent $70 at Greenfingers Garden Centre, paid a fine of $45 and spent $48 for babysitting. She had $193.09 in her account at the end of the day. The bank statement for March shows that she had transferred into this account a total of $5,600 in three different payments from the Fastsaver 894 account during the month of March 2008.

[132] The ASB REB 01 account had a balance of $780.17 at the end of the day. The ASB Omni account had a balance of $205.17 at the end of the day, although it was overdrawn $4.83 at one point during the day. The appellant had a total of $1,178.30 in her bank accounts at the end of the day.

[133] It is difficult to see why a mother who had no food and no money to buy food would spend $70 at a garden centre. We are not satisfied that the appellant had no funds to purchase food or an immediate need to purchase food. We are satisfied that on review, the Chief Executive was correct to make this grant recoverable.

Application for Food Grant – 11 July 2008

[134] At the point this application was made, the appellant was advised that her Special Benefit had been suspended. She had an appointment with her case manager the following week to have it resumed. She said she had been left short of money for food as she was in overdraft at her bank. She was given $100 for food. The appellant apparently produced a bank printout to show where her money had been spent. The ASB joint account was $82.92 overdrawn. She had spent $44 on food the previous day, suggesting she may not have been without food. The ASB REB 01 account had a balance of $406.29 and the ASB Omni account was overdrawn $295.91.

[135] We note that in July 2008, there were no transfers into her account from the Fastsaver 894 account and very few after this date. It is possible that the appellant’s financial circumstances had become more difficult at this time, but the balance of $406.29 in the Omni account suggested that there was money available to purchase

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food. It cannot be said the appellant had no money with which to buy food at the date of her application. The Chief Executive was correct to make this grant recoverable.

Application for Food Grant – 15 July 2008

[136] The appellant said that she had no money to buy food for the children this week. The ASB joint account balance remained at $82.92 overdrawn. The ASB REB 01 account remained at $406.29 in credit and the ASB Omni was at $489.09 by the end of the day, after payment of the appellant’s benefit entitlement. The benefit payment was $667.08. It is surprising that the Ministry would pay a Special Needs Grant on the same day that the appellant’s benefit payment was made. We cannot say that the appellant had no funds to buy food. We therefore accept that the Chief Executive was correct to make this non-recoverable grant recoverable.

Recovery of debt – s 86(9A)

[137] Generally speaking, overpayments of benefit are debts due to the Crown and must be recovered. There is a limited exception to this rule contained in s 86(9A) of the Social Security Act 1964. This provision gives the Chief Executive the discretion not to recover all or part of the debt in circumstances where:

(a) the debt was caused in whole or in part as a result of an error by an officer of the Minister;

(b) the beneficiary did not intentionally contribute to the error;

(c) the beneficiary received the payments of benefit in good faith;

(d) the beneficiary changed his position believing he was entitled to receive the money and would not have to repay it; and

(e) it would be inequitable in all the circumstances, including the debtor’s financial circumstances, to permit recovery.

[138] Pursuant to s 86(9B) of the Act, the term “error” includes:

(a) the provision of incorrect information by an officer of the Ministry;

(b) an erroneous act or omission occurring during an investigation of benefit entitlement under s 12; and

(c) any erroneous act by an officer of the Ministry.

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[139] The requirements of s 86(9A) are cumulative; if one of the criteria cannot be made out it is not necessary to proceed to consider subsequent criteria.

Overpayment of Domestic Purposes Benefit and Disability Allowance

[140] The first issue we must consider is whether the overpayments of these benefits has occurred as a result of an error on the part of the Ministry to which the appellant did not intentionally contribute.

[141] The Authority has been provided with Benefit Review Forms completed by the appellant in 2006, 2007 and 2008. We have also been provided with five Special Benefit Review forms and three Temporary Additional Support Review forms. The significant feature of these forms is that:

● The annual review forms ask the appellant to disclose “money received from any source”. This could be viewed as a requirement to disclose all money received, whether or not it was a gift. The issue is clouded, however, by the notes in the margin which, under the heading “income from other sources”, gives examples of “income” but does not suggest that gifts or periodic payments of capital might constitute income. The use of the term “income” in the heading is unhelpful. Income has a particular meaning in the minds of most people. Had the heading said “money from other sources” we would have expected the appellant to disclose gifts. But the margin note refers to “income”, not “money from any source”.

● None of the forms ask the appellant to disclose gifts or explain that gifts might constitute income.

[142] Many parents wanting to assist or provide a better lifestyle for their adult children and grandchildren on a benefit would not appreciate that their gifts might constitute “income” for the purposes of the Social Security Act 1964. Neither would the beneficiary necessarily realise that the receipt of gifts might constitute income which should be declared. Moreover, the use of the word “income” in the forms establishes something of a precedent in alerting the beneficiary about what money must be declared.

[143] On behalf of the Chief Executive, it is submitted that the Ministry phrases letters and forms in a broad way to capture all kinds of monetary assistance received by a beneficiary. Reference is made to a number of letters sent to the appellant over the years which advised her to disclose changes that could affect her payments.

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[144] These letters fall into two categories. The first type of letter refers to “income or other help”. Again, use of the word “income” may well limit the type of monetary receipt an individual might declare. The use of the words “other help”, while very general, is perhaps so vague that the recipient may not necessarily identify assistance from family as filling that description. The second group of letters require the recipient to notify the Ministry if they “receive any money or get other help”. These letters are sufficiently general in the way they describe the need to advise of “money received” rather than income, but having regularly used the word “income” in other forms and letters, a person might not necessarily be alerted to the wider request. It is important that there be consistency to prevent misunderstanding.

[145] We consider that use of the word “income” and lack of information concerning what constitutes “income”; in particular, that gifts will constitute income in the various benefit application and review forms, is an error on the part of the Chief Executive and in this case that error has partly resulted in the Domestic Purposes Benefit and Disability Allowance debts.

[146] We must then consider whether the error was one to which the appellant did not intentionally contribute. There is no information before us that, in addition to the information contained in the forms, the appellant was ever specifically told that she must declare receipt of monies from family used for living expenses, whether it be a gift or a loan. We cannot say that she intentionally contributed to the Ministry’s error in failing to provide information about what constituted “income” or that gifts from family needed to be declared. We are prepared to accept that the appellant did not intentionally contribute to the Ministry’s error in relation to her receipt of Domestic Purposes Benefit and Disability Allowance.

[147] We are then required to consider whether or not the appellant received the money paid in good faith. That means that she received the benefit money believing that she was entitled to it. We have some reservations in this regard because the appellant has not completed her benefit review forms in a manner which fully informed the Ministry of her situation and the information she provided the Ministry was, at times, misleading; for example, in relation to other benefits she sought. She routinely failed to disclose the balances in her bank accounts when the forms specifically required her to do so. Had she done so, it is possible that questions may have been asked about the source of her funds, although her bank balances would not have affected her entitlement to Domestic Purposes Benefit and Disability Allowance. The appellant submits that much information was conveyed to Ministry staff orally and forms were completed under the direction of Ministry staff. She suggests she was told she did not need to put her bank balances in the various forms. The appellant was dealt with by a number of different staff over the

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years. We do not accept that Ministry staff would have routinely told the appellant not to put information such as bank account balances in the forms. With some reservations we are prepared to give the appellant the benefit of the doubt and accept that she received the payment of Domestic Purposes Benefit and Disability Allowance believing that she was entitled to those payments.

[148] For similar reasons, we accept that the appellant spent the benefit money received in relation to these benefits believing she was entitled to it and that she would not need to repay it.

[149] We then need to consider whether in all the circumstances including the appellant’s financial circumstances it would be inequitable to require repayment. The evidence as a whole demonstrates the appellant was willing to mislead the Ministry about her correct financial circumstances. Moreover, we are not satisfied that the appellant has been open and frank with the Authority. It is not evident where the money for house renovation or repair costs came from and while on the one hand the appellant has now told us that she did not carry out renovation work prior to moving to XXXX Street, that is not the evidence she gave at the hearing and is inconsistent with the information contained in the email of 5 December 2007 to her mother. In some years the appellant received an amount greater than the benefit money from her mother. It is surprising that she did not question her ability to receive this amount of money in addition to her benefit. As a result of the money received, the appellant was substantially better off than most beneficiaries.

[150] At the time of the hearing the appellant was still in receipt of a benefit. We understand that more recently she has obtained some employment. The appellant still owns a house with a significant equity in it.

[151] We do not consider it would be inequitable in all the circumstances, including the appellant’s financial circumstances, to require recovery of the debts. We are not prepared to direct that the debts of Domestic Purposes Benefit and Disability Allowance not be recovered pursuant to the provisions of s 86(9A) of the Act.

Overpayment of Accommodation Supplement

[152] We have first considered whether or not the Accommodation Supplement debt occurred wholly or partly as a result of an error on the part of the Ministry. To the extent that we believe there were deficiencies in the application forms failing to explain that gifts from family constitute income, we accept that the debt was partly caused by an error on the part of the Ministry and that the appellant did not intentionally contribute to this particular error.

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[153] We must then consider whether or not the appellant received the payment of Accommodation Supplement in good faith. To receive the payments in good faith the appellant must have genuinely believed she was entitled to the payments. In addition, good faith will require that the beneficiary did not knowingly mislead the Ministry in obtaining benefit payments. We are not satisfied the appellant received the payments of Accommodation Supplement in good faith, for the following reasons:

(i) She did not disclose the existence of the $104,000 owing to her in respect of the XXXX Road property after she purchased 1 XXXX Road in the period May 2005 to August 2006.

(ii) In January 2006, when questioned about her mother and stepfather’s ownership of 25 XXXX Road, she reassured the Ministry that they had no involvement in payment of the mortgage, rates and insurance. At least until June 2008, we are not satisfied that the appellant was solely responsible for payment of outgoings on the house when she was routinely receiving large payments from the Fastsaver 894 account held in the name of her mother and stepfather to meet her living costs, including her mortgage payments. We note that payments from the Fastsaver 894 account usually went to the ASB joint account but the appellant routinely made payments from that account to the REB 01 account from which the mortgage payments were made.

[154] We are not satisfied on the balance of probabilities that the appellant received the Accommodation Supplement payments in good faith.

[155] If we are wrong in this regard, we must then consider whether or not it would be inequitable in all the circumstances, including the appellant’s financial circumstances, to permit recovery. In this regard we note:

● The failure of the appellant to disclose the asset (in whatever form) of $104,000 owing to her in respect of the XXXX Avenue property.

● The appellant’s mother was involved in the payment of money towards the mortgage, rates and insurance, contrary to the appellant’s advice to the Ministry.

● The resources held in the Fastsaver 894 account could have been used to reduce the mortgage in a lump sum rather than used for living costs, thereby reducing her payments.

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● When the appellant was asked to identify the account from which costs relating to the renovation of her houses were met, the appellant advised that she did not renovate any of the houses until she moved to XXXX Street. This must be contrasted with the other evidence available. For example, at the hearing in May 2014 she told the Authority that 1 XXXX Road was “a cheap do up” proposition and she had replaced the carpet and painted it. She also referred to work at 25 XXXX Road. On 5 December 2007, in relation to 25 XXXX Road, she wrote to her mother:

“Well the house is slowly getting there, it’s really slow and it’s very hard going. It’s been done on the cheap but still costs quite a bit but to be honest there is no way I could have done this without help. I have decided to ask Ben to build in shelves outside the main bathroom. I think it will be about $1,500.”

It seems likely that the post-hearing submission to the Authority that the appellant did not renovate the XXXX Road property, is untrue.

● If the appellant had funds available to her to carry out renovations on the property, then arguably these funds should have been set-off against her mortgage to reduce her accommodation costs. Accommodation Supplement is not provided to enable a property to be renovated and sold for a profit. The bank accounts analysed do not reflect spending on renovations. We can only infer that the costs came from an account which has not been analysed and that spending on renovations is not reflected in the Ministry’s analysis.

[156] While the appellant’s financial circumstances at the time of hearing were that she remained in receipt of a benefit, she is not without assets. We do not consider it would be inequitable in all the circumstances, including her financial circumstances, to require repayment of the Accommodation Supplement debt. We are not prepared to direct that the Accommodation Supplement debt not be recovered pursuant to s 86(9A).

Overpayment of Special Benefit

[157] The first issue for the Authority to consider is whether the debt relating to Special Benefit was caused by an error on the part of the Ministry. To the extent that the Ministry’s forms were inadequate as previously outlined, we accept that the debt was partly caused by an error on the part of an officer of the Ministry. While the appellant’s actions may have contributed to this debt, she did not contribute to the error made by the Ministry.

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[158] We are then required to consider whether the appellant received payment of this benefit in good faith. This requires that the appellant received Special Benefit believing she was entitled to it and did not mislead the Ministry as to her circumstances.

[159] The Authority has received six Special Benefit review forms covering the period 26 March 2005 to 8 December 2008. Each of these forms asks the appellant if she has any “cash assets”. The examples given of “cash assets” include money in a bank and money lent to other people or organisations. Each application appears to have been completed by the same person. We infer this was the appellant. In none of the applications has the appellant included the amount held in her bank accounts. Furthermore, on various occasions the appellant has written on the form that she has no money to pay for food for herself and her children or no money to pay for her health costs or her living expenses. On its face, this information was simply untrue.

[160] In the Special Benefit review form of 24 March 2005, the appellant says that “I have no money to pay for food for myself and my two children let alone cover basic phone, power and medical costs and school fees”. As at 24 March 2005, the ASB joint account shows that the appellant had a balance of $1,518.11. Two days before she made this declaration to the Ministry, $800 had been paid into her account from the Fastsaver 894 account belonging to her mother and her stepfather. We do not have statements for other accounts operated by the appellant in March 2005.

[161] Another example of the appellant misleading the Ministry occurred on 24 February 2007, when she made a statement on a Special Benefit Review form that she had no money to buy food for her children. The appellant had $1,525.34 in the ASB joint account and she had spent $128.18 the day before at Foodtown in Grey Lynn. On the same day she had $951.87 in the ASB REB 01 account. By comparison, the ASB Omni account into which her benefit was paid showed a balance of $8.35. We understand from the appellant’s evidence that this was the account balance that she showed to the Ministry when she made her application. To state that she did not have sufficient money for food and other living expenses on her Special Benefit review form when she had over $2,000 in her bank accounts was highly misleading.

[162] The appellant says that she has never included bank balances in her benefit review forms, on the advice of Ministry staff. The advice the appellant was given would to some extent have depended on what the appellant told Ministry staff in the first instance. The Authority does not accept that the Ministry would have routinely told the appellant not to include the balances in her bank accounts had she told them just how much was in the accounts – or indeed, that she had three bank accounts and not just the one for which she provided a balance to the Ministry. She also claims that various

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review forms did not require her to state the amount in her bank accounts. It is true that the review forms refer to “assets”, but they also clearly give as an example of cash assets “money in a bank or savings organisation”. It is also very clear that the appellant never told the Ministry about the substantial assistance she was receiving from her family.

[163] In summary, because the appellant did not fully disclose her financial circumstances to the Ministry; because she provided one bank balance and not others; and because she made misleading statements to the Ministry about her lack of resources; in our view she intentionally misled the Ministry about her situation. We do not consider in these circumstances it can be said that the appellant received the payments of Special Benefit in good faith.

[164] If we are wrong in this regard then, in our view, given the appellant’s misrepresentation of her financial circumstances, we do not consider it would be inequitable in all the circumstances, including her financial circumstances, to require recovery of the debt.

[165] We are not prepared to direct that the debt relating to Special Benefit not be recovered pursuant to the provisions of s 86(9A).

Temporary Additional Support

[166] We are first required to consider whether or not the overpayment arose as a result of an error on the part of the Ministry. The Temporary Additional Support forms require the appellant to disclose her income. For the reasons previously outlined, we consider it was not adequately explained to the appellant that this might include gifts from family. We accept that this error has, in part, caused the debt in this case. The appellant did not intentionally contribute to the Ministry’s error.

[167] We are then required to consider whether or not the appellant received the payments of Temporary Additional Support in good faith. As previously noted, we consider that this requires that not only did the appellant receive the money believing she was entitled to it, but that she did not mislead the Ministry in making her application.

[168] The appellant made application for Temporary Additional Support on 24 August 2009. In her application she stated “I don’t have enough money for food – I have been working really hard towards my career and getting alternative employment – but as yet I am not making money I need help”. The appellant’s financial records show that she had been in Canada the previous month and that a little more than two weeks after stating that she had insufficient money to pay for food, she was in Queenstown skiing. Three

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days after her application, on 27 August, she transferred a sum of $1,200 from the Fastsaver 894 account into the ASB joint account, and in the days immediately before her application she had spent money at Borders, Amazon, St Lukes and the French Art Shop. A payment of $2,500 was made onto her credit card on 12 September. Taking this information into account, we consider that the appellant deliberately misled the Ministry in advising that she had no money for food. We are not satisfied that the appellant received the resulting payments for Temporary Additional Support in good faith. We are not prepared to direct that the debt not be recovered pursuant to the provisions of s 86(9A) of the Act.

[169] If we are wrong in this regard, given the circumstances described and the fact that Temporary Additional Support is intended as a last resort to alleviate the financial hardship of people whose essential costs cannot be met from their chargeable income and other resources, we are not satisfied it would inequitable in all the circumstances, including the appellant’s financial circumstances, to require recovery.

Special Needs Grants

[170] We have previously outlined in detail the Special Needs Grants that the Chief Executive seeks to recover and the circumstances in which those grants were made. In relation to the grants of 29 September 2006, 23 August 2007, 29 February 2008 and 13 March 2008, we are in no doubt that it was correct for the Chief Executive to make the grants recoverable when the appellant’s true circumstances came to light.

[171] We do not consider that the debts which are now owed in relation to these grants arose as a result of an error on the part of the Ministry. They arose because the appellant simply misled the Ministry as to her correct circumstances. Indeed, we are in no doubt that in relation to some of the grants the appellant intentionally misled the Chief Executive. We cannot direct that they not be recovered pursuant to the provisions of s 86(9A) of the Social Security Act 1964.

Summary of Findings

[172] In summary, the Authority makes the following findings:

(i) The Chief Executive’s method of establishing the appellant’s chargeable income in excess of known sources of income, by reference to her spending, was an appropriate method of calculating her chargeable income in the circumstances.

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(ii) The monies received from the appellant’s mother were gifts, not loans. These gifts constituted income for the purposes of the Social Security Act 1964.

(iii) Part of the appellant’s spending was from money borrowed from banks. As a result, the Ministry’s assessment of the appellant’s income is to be reduced by $25,604.76 in the year ending 31 March 2009 and $22,500 in the year ending 31 March 2010. In the year ending 31 March 2007, the figure of $20,000 is to be used to replace the business expenses figure of $19,956.00.

(iv) The Ministry’s assessment of the appellant’s income also needs to be reduced by an amount of $10,000 in the year ending 31 March 2008, in accordance with our findings at paragraph [28].

(v) The overpayments in respect of Domestic Purposes Benefit and Disability Allowance will need to be adjusted to take account of the Authority’s directions.

(vi) The appellant had no entitlement to Special Benefit for reasons apart from her income. The debt in relation to Special Benefit is to be calculated on the basis that the appellant had no entitlement to Special Benefit.

(vii) The appellant had no entitlement to Accommodation Supplement up to 1 June 2008. After 1 June 2008, entitlement is to be calculated on the basis of her income.

(viii) Non-recoverable Special Needs Grants made on 29 September 2006, 23 August 2007, 29 February 2008 and 13 March 2008, are to be made recoverable.

(ix) The requirements of s 86(9A) have not been made out in relation to the debts. We cannot direct that they not be recovered pursuant to that section.

[173] The appellant is invited to make submissions on whether the Chief Executive should be directed to take no steps to recover the debts pursuant to s 86(1) or s 86A of the Act within 21 days of the date of this decision. The appeal is adjourned for this purpose.

[174] Leave is reserved to either party to return to the Authority for directions relating to the calculation of the appellant’s income and debt if required.

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DATED at WELLINGTON this 14th day of September 2015

______________________________

Ms M Wallace

Chairperson

______________________________

Mr K Williams

Member

______________________________

Lady Tureiti Moxon

Member

SSA 054-13(2).doc