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Accident Compensation Cases

Re SSA156/12 (SSAA, 21/11/13)

Judgment Text

DECISION 
Ms M Wallace - Chairperson, Mr K Williams - Member, Mrs N Te Hira - Member
Introduction 
[1]
The appellant appeals against a decision of the Chief Executive upheld by a Benefits Review Committee to: 
(i)
Establish and recover an overpayment of Domestic Purposes Benefit — Care for the Sick and Infirm paid to his wife in the period 16 October 2011 to 20 May 2012; and 
(ii)
To establish and recover an overpayment of Accommodation Supplement paid in respect of the period 16 October 2011 to 20 May 2012 amounting to $1,411.14. 
[2]
The overpayments of Domestic Purposes Benefit — Care for the Sick and Infirm and Accommodation Supplement were established when the Accident Compensation Corporation (the Corporation) made a decision to reinstate the appellant's Accident Compensation (ACC) payments. 
[3]
The overpayment of Domestic Purposes Benefit — Care for the Sick and Infirm was recovered by the Ministry from arrears of Accident Compensation payments due to the appellant. 
[4]
Whilst an overpayment of Sickness Benefit paid to the appellant in respect of the same period has been established and recovered the appellant accepts that the decision to recover that overpayment from ACC payments was correct. 
[5]
The overpayment of Accommodation Supplement remains outstanding. 
Background 
[6]
The appellant suffered a brain injury in 1995. He has been in receipt of income related ACC payments for much of the time since then. On 25 October 2011 his ACC payments were stopped and the appellant and his wife were obliged to seek financial support from the Ministry under the Social Security Act 1964. 
[7]
The appellant and his wife attended an appointment on 5 October 2011 to lodge their applications. We understand that the appellant and his wife had largely completed their respective applications prior to their appointment. The appellant sought a Sickness Benefit and his wife sought a Domestic Purposes Benefit — Care for the Sick and Infirm as a result of her need to care for the couple's autistic daughter. 
[8]
A decision was made by the centre manager to have one case manager to assist the appellant and another to assist his wife in finalising the applications. 
[9]
This was a matter of concern to the appellant's wife as she is the appellant's agent and generally assists him with benefit matters because of his head injury. 
[10]
In any event the applications were duly completed and the appellant was granted Sickness Benefit and his wife was granted Domestic Purposes Benefit — Care for the Sick and Infirm. The appellant was also granted Accommodation Supplement. 
[11]
On 23 May 2012 the Corporation advised the Ministry that the appellant's ACC payments had been reinstated from October 2011. The Corporation requested the Ministry provide details of the amount required to reimburse the benefits paid to the appellant and his wife. 
[12]
On 28 May 2012 the Ministry sent a fax to the Corporation as follows: 
“Please find attached details of reimbursement required for xxxx. Please pay the total reimbursement only. Gross $13,192.86, net $11,807.56, total reimbursement $11,807.56. ”
[13]
The communication did not distinguish between the Sickness Benefit paid to the appellant and the Domestic Purposes Benefit — Care for the Sick and Infirm paid to his wife. The appellant has two concerns in this regard, the first is that he does not consider that his wife's Domestic Purposes Benefit — Care for the Sick and Infirm should have been recovered from the arrears of ACC payments. The second is that the failure to distinguish between his wife's benefit and his own benefit may have resulted in taxation credits resulting from the repayment being attributed incorrectly. 
[14]
On the same day the appellant was advised of the overpayment and that the Corporation would reimburse the Ministry in respect of the main benefit debts. Again the letter failed to distinguish between the payment of Sickness Benefit and the payment of Domestic Purposes Benefit — Care for the Sick and Infirm. In addition the appellant was advised of the overpayment of Accommodation Supplement. 
[15]
The appellant subsequently sought a review of decision. The matter was reviewed internally and by a Benefits Review Committee. The Benefits Review Committee upheld the decision of the Chief Executive. The appellant then appealed to this Authority. 
Decision 
[16]
Section 71A of the Social Security Act 1964 requires that where a person receives an income tested benefit and they or their spouse or partner receives weekly compensation, then the amount of benefit received must be reduced by the amount of weekly compensation payable to that person. 
[17]
Section 81 of the Social Security Act 1964 permits the Chief Executive to review entitlement to benefit from time to time in order to ascertain whether the beneficiary may not have been entitled to receive a benefit or a particular rate of benefit. 
[18]
On receipt of advice from the Corporation that the appellant was to receive a backdated payment of ACC for the same period in respect of which he and his wife had been in receipt of benefits it was open to the Chief Executive to review the benefit entitlement of both the appellant and his wife. 
[19]
For the purposes of assessing eligibility for Accommodation Supplement during the period the appellant has retrospectively become entitled to ACC payments, the ACC payments are to be treated as income and entitlement to Accommodation Supplement assessed accordingly. 
[20]
It is also relevant to note that s 252 of the Accident Compensation Act 2001 provides that where a person who has received an income tested benefit under the Social Security Act 1964, establishes a claim for entitlement to ACC payments in respect of the same period, and it is determined that an excess benefit payment has been paid in respect of that period, then the Corporation must refund the excess benefit payment to the Ministry of Social Development. This provision applies only in respect of income tested benefits. The definition of income tested benefit in s 3 of the Social Security Act 1964 includes Sickness Benefit and Domestic Purposes Benefit. It does not include Accommodation Supplement. The Chief Executive must recover overpayments of supplementary benefits such as Accommodation Supplement directly from the recipient. 
[21]
The ability of the Chief Executive to review benefit entitlement and recover benefit payments from payments of earnings related compensation from the Corporation was considered by the High Court in M v the Chief Executive of Work and Income1
| X |Footnote: 1
HC Wellington AP 335/01, 27 August 2002 
. The Court found: 
“[33]
Section 80(3) plainly envisages a hindsight review of benefit entitlement. This does not mean that a beneficiary who subsequently receives a backdated compensation entitlement was not entitled to have received a benefit for that backdated period; it simply means that the entitlement to a benefit has been retrospectively supplanted by an entitlement to compensation. ”
Recovery of Domestic Purposes Benefit — Care for the Sick and Infirm 
[22]
The first issue which concerns the appellant is that his wife's entitlement to Domestic Purposes Benefit — Care for the Sick and Infirm was deducted from his entitlement to ACC. The appellant and his wife said that they did not understand that the Domestic Purposes Benefit — Care for the Sick and Infirm would have to be repaid from the compensation paid and this benefit should not have to be repaid because it is based on annual income. The appellant's wife was on a separate and different benefit. 
[23]
Section 71A of the Act clearly provides that if a person receives a benefit and they or their spouse or partner receive an ACC payment then the amount of benefit payable must be reduced by the amount of weekly compensation payable to the person. Accordingly when the Corporation advised that a backdated payment of ACC was to be paid to the appellant in substitution for the benefit he had been receiving the Chief Executive was obliged to consider the ongoing eligibility to benefit of both the appellant and his wife who was in receipt of a separate income tested benefit. 
[24]
Section 71A requires the Chief Executive to take into account the appellant's receipt of ACC payments in assessing his wife's entitlement to benefit. In this instance the ACC payments are not treated as income in assessing his wife's entitlement. The ACC payments must be directly deducted dollar for dollar from the total amount of benefit payments made to the appellant and his wife. 
[25]
When the Ministry is aware that a person applying for benefit hopes to establish entitlement to ACC payments and that the amount of any benefit paid to them will be recovered from any arrears of ACC paid, good administrative practice requires that beneficiaries should be told that this will happen. There is no statutory requirement to do this. 
[26]
The issue of benefit payments received by a spouse being deducted from a retrospective payment of ACC was considered by the High Court in Lang v the Chief Executive of the Ministry of Social Development2
| X |Footnote: 2
HC Wellington CIV 2006-485-837, 8 December 2006 
[27]
The High Court explained s 71A in this way: 
“[13]
… It (referring to s 71A) establishes that the section as a whole applies to a person qualified to receive income tested benefits where: 
(a)
The person is themself entitled to receive weekly compensation in respect of the person or his or her spouse or dependent child; or 
(b)
The person's spouse receives weekly compensation. 
[14]
Section 71A(1) in effect expands who ‘the person’ is to include both the direct beneficiary and their spouse. The rate of benefit payable to either is to be reduced by the amount of weekly compensation either receives. ”
[28]
We would add further that it does not matter whether the appellant's wife was receiving the half married rate of the appellant's Sickness Benefit or receiving a benefit in her own right, the provisions of s 71A apply. 
[29]
In Lang3
| X |Footnote: 3
HC Wellington CIV 2006-485-837, 8 December 2006 
the High Court explained the Corporation's obligations under s 252 of the Injury Prevention, Rehabilitation and Compensation Act 2001 in the following way:- 
“[17]
Section 252 of the Injury Prevention, Rehabilitation and Compensation Act 2001 further reinforces the conclusion that both benefits are liable to adjustment. Section 252 applies when a person both receives a payment of income tested benefit and also establishes a claim for weekly compensation. It accordingly applies to Mrs Lang because she has been receiving half the married rate invalid's benefit and also has established an entitlement. 
[18]
The terms of s 252 require ACC to refund to the Ministry any ‘excess benefit payment’. Importantly s 252(5) provides: 
‘an excess benefit payment includes a payment of any part of a married rate of benefit that is paid to the spouse of the person who established the claim to the benefit. ’”
[19]
Thus in establishing the excess benefit payment to Mrs Lang the section expressly requires the amount of benefit paid to Mr Lang to be taken into account. To interpret s 71A as the appellant would have it would be to create an inconsistency. Sections 252 and 71A reflect the same principle. What is to be assessed is the combined benefit income of the married couple. ”
[30]
Furthermore at paragraph 24 the Court noted: 
“[24]
That consequence would not follow for the reasons given under this issue one. The husband's benefit is to be adjusted if weekly compensation is received by his spouse. It makes no difference if she is receiving 50% of their married benefit or an adjusted rate in her own name. The amount the couple gets will be the same. The amount however distributed is liable to be offset against any backdated weekly compensation. ”
[31]
Significantly s 252(5) requires the Corporation to refund any part of a married rate of benefit that is paid to the spouse or partner of the person who established the claim to ACC. It does not specify that the married rate of benefit received by the appellant's wife must be the same type of benefit as that received by the appellant. In this case both the appellant and his wife received income tested benefits at the married rates described in the schedules of the Act, albeit they were different benefits. The Corporation then had an obligation to deduct the amount of xxxx benefit from the backdated payment of compensation payable to her husband. 
[32]
While this Authority does not have jurisdiction to consider the actions of the Corporation, given the legislation contained in s 252 it is understandable that the Corporation would refund the amount of benefits paid to both the appellant and his wife regardless of whether they were paid different types of benefit. The critical issue is whether or not the payments made to each were based on the married rate of the benefit concerned. 
[33]
We are in no doubt that the Corporation was required to deduct the amount received by the appellant's wife in respect of Domestic Purposes Benefit — Care for the Sick from the backdated payment of compensation payable to her husband. Once the payment was received from ACC there was no basis on which the Ministry could refund the money to her. 
Calculation of the debt 
[34]
Following the hearing the Ministry have provided a detailed explanation of the way in which the debts were calculated in this case. We accept the debts have been calculated correctly. It is unfortunate that a comprehensible breakdown was not provided to the appellant prior to the hearing. 
Taxation 
[35]
The appellant is concerned that because the memorandum to ACC did not separate out the benefit paid to him and the benefit paid to his wife that credits for taxation may not have been made correctly. We note that the Ministry have now provided amended summaries of the amount to be repaid in respect of the appellant and his wife including tax. 
[36]
Since 1999 an administrative protocol has been in place between the departments to deal with tax issues arising from the repayment of benefit from backdated payments of ACC. As a result of this agreement the tax paid on the benefit is refunded directly by the Corporation to the Inland Revenue Department and the Inland Revenue Department refunds the tax component to the Ministry of Social Development. This arrangement has been discussed on a number of occasions in the High Court4
| X |Footnote: 4
Buis v the Accident Compensation Corporation, HC AK CIV 2007-404-004703, 6 March 2009 
5
| X |Footnote: 5
Reddell v Accident Compensation Corporation, HC AK CIV 2008-485-002736, 24 June 2009 
6
| X |Footnote: 6
Hollis v the Commissioner of Inland Revenue, HC NP CIV 2009-441-00074, 30 October 2009 
 
[37]
In the appellant's case the refund of the amount specified as tax would have been refunded by the Inland Revenue Department to the Ministry of Social Development under a monthly payment schedule through the Crown account. The ACC payments which replaced the benefit payments are then taxed. The payments are taxed by the Inland Revenue Department in the year they are received rather than the year entitlement arose. The practical effect is that where the appellant receives a lump sum covering more than one year's payments the recipient of a backdated lump sum ACC payment may be required to pay tax at a higher rate than would have been payable had the payments been received in the period for which they were paid. This is a matter of tax legislation, it is not a matter which the Authority has any jurisdiction over. If the appellant or his wife have concerns in relation to their tax they should take them up with the Inland Revenue Department. 
Recovery under s 86(9A) 
[38]
The issue for the Authority then is whether or not the debt of Domestic Purposes Benefit — Care for the Sick and Infirm and Accommodation Supplement should be recovered. 
[39]
Section 85A of the Social Security Act 1964 provides that an overpayment of benefit is a debt due to the Crown. 
[40]
Section 86(1) and s 86A give the Chief Executive a discretion to take steps to recover debts. 
[41]
Section 86(9A) makes specific provision for the Chief Executive not to recover a debt where:- 
(a)
The debt was caused wholly or partly by an error by an officer of the Department; and 
(b)
The error was not intentionally contributed to by the beneficiary; and 
(c)
The person receiving the amount paid in error receives the money in good faith; and 
(d)
The person receiving the money altered his or her position believing they were entitled to 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 require recovery. 
[42]
“Error” is defined in s 86(9B) as meaning— 
(i)
The provision of incorrect information by an officer of the Department; 
(ii)
any erroneous act or omission of an Officer of the Department that occurs during an investigation under s 12; 
(iii)
any other erroneous act or omission of an officer of the Department. 
[43]
The provisions of s 86(9A) are cumulative. If one of the criteria of s 86(9A) cannot be made out it is not necessary to proceed to consider subsequent criteria. 
[44]
The first issue to be considered is whether the debts of Domestic Purposes Benefit — Care for the Sick and Infirm or Accommodation Supplement were caused by an error by an officer of the Ministry. 
[45]
In relation to the Accommodation Supplement debt the appellant says that he had stated at his interview that he did not want to be paid anything which would incur a debt. He did not want to be paid Accommodation Supplement at a rate greater than if he was in receipt of his usual ACC payment. He said this request was apparently ignored. The appellant's wife said that this situation was exacerbated by the fact that she was separated from her husband in the interviewing process despite the fact that she is his agent for benefit purposes. 
[46]
The case manager who interviewed the appellant's wife explained to the Authority that Accommodation Supplement could only be granted to one partner and in this case the application had been completed for the appellant. He explained that the calculation of entitlement to Accommodation Supplement is systems generated, based on the information given about the client's accommodation costs. The inference to be drawn is that it would not be possible to adjust the payments in the manner suggested by the appellant. 
[47]
Despite the fact that the appellant's wife had completed her husband's application form prior to the appointment there is no notation on it suggesting that the appellant wanted Accommodation Supplement limited in the fashion that she described to us. Neither is there any suggestion that she explained to the case manager who was dealing with her application that she wanted any application for Accommodation Supplement paid to her husband to be limited. The appellant's wife appeared to us to be a very capable person. We think that if she wanted the Accommodation Supplement limited she would have told the person that was dealing with her application that this was the case, even if it was attached to her husband's application. 
[48]
In addition we note that the appellant needed to apply for Temporary Additional Support. This suggests that without a full grant of Accommodation Supplement the family would have struggled to make ends meet during the period they were in receipt of social welfare benefits. 
[49]
We are not satisfied that there was any error on the part of the Ministry in granting Accommodation Supplement to the appellant and paying it at the full rate. 
[50]
Neither was it an error to grant and pay Domestic Purposes Benefit — Care for the Sick and Infirm to the appellant's wife. 
[51]
As we are not satisfied that the debts arose as a result of an error on the part of the Ministry we cannot direct that the debts not be recovered pursuant to the provisions of s 86(9A) of the Social Security Act 1964. 
Recovery — Section 86(1) and s 86A 
[52]
Sections 86(1) and 86A give the Chief Executive a discretion to take steps to recover a debt. Section 86(1) applies to debtors who are still in receipt of benefit. Section 86A applies to debtors who have sources of income other than benefit. In our view the principles will be the same whether the recovery action is under s 86(1) or s 86A. 
[53]
Parliament has specified the circumstances in which a debt should not be recovered in s 86(9A). The occasions therefore that the Chief Executive should exercise his discretion not to take steps to recover a debt or debts which do not meet the criteria of s 86(9A) must therefore be limited7
| X |Footnote: 7
Director General of Social Welfare v Attrill and others, [1998] NZAR368 
[54]
The considerations to be taken into account in exercising the discretion include the Chief Executive's obligations under the Public Finance Act 1989 to make only payments authorised by law and under the State Sector Act 1988 for the economic and efficient running of the Ministry. The context of the Social Security Act 1964 and the impact of recovery on the debtor and his or her dependents are also relevant. 
[55]
The circumstances in which the discretion should be exercised have been considered by the High Court on a number of occasions in the context of s 86(1). The circumstances have been described as “extraordinary”8
| X |Footnote: 8
McConkey v Director-General of Work & Income New Zealand HC WN AP 277-00, 20 August 2002 
, “unusual”9
| X |Footnote: 9
Cowley v Chief Executive of the Ministry of Social Development HC WN CIV-2008-485-381, 1 September 2008 
and “rare and unusual”10
| X |Footnote: 10
Osborne v Chief Executive of the Ministry of Social Development HC Auckland CIV-2007-485-2579, 31 August 2009 
[56]
The discretion conferred by s 86(1) to take steps to recover a debt simply gives the Chief Executive the discretion to take no action to recover a debt. It does not extinguish the debt. It is a discretion which may be exercised from time to time so that if a debtor's circumstances change recovery action can be halted or started or the repayment rate varied. 
[57]
In relation to the debt of Domestic Purposes Benefit — Care for the Sick and Infirm the Chief Executive is not required to take any action to recover the debt. Rather s 252 of the Injury Prevention, Rehabilitation and Compensation Act 2001 required the Corporation to refund the excess benefit payment to the department responsible for the administration of the Social Security Act 1964. The Corporation does not have any discretion in this regard. Once payment is made to the Ministry the debt has been recovered. The Chief Executive is not required to exercise any discretion under ss 86(1) or 86A to take steps to recover the debt and the Chief Executive does not have power under the Social Security Act 1964 to refund the recovered money to the appellant. In short in relation to the Domestic Purposes Benefit — Care for the Sick and Infirm benefit there is no ability to consider the individual circumstances of the appellant if the criteria of s 86(9A) cannot be made out. 
[58]
The debt in relation to Accommodation Supplement is $1,411.14. The appellant was not prepared to disclose his financial circumstances to assist the Authority in determining whether or not the debt should be recovered. We understand that he received at least $8,000 from the Corporation after the repayment of his Sickness Benefit and his wife's Domestic Purposes Benefit — Care for the Sick and Infirm. This suggests there were funds available with which he could have repaid the Accommodation Supplement debt. The appellant also referred to the fact that he had received some significant payments from the Corporation since the matters which are the subject of this appeal arose. We were told that these payments were used to purchase a new car and repay debt. 
[59]
We understand that the appellant's autistic daughter receives a benefit in her own right. A daughter who was dependent at the time he was in receipt of benefit is now working. When he applied for benefit the answers given in the benefit application form indicated that the appellant had previously received $729.74 a week from the Corporation. The appellant and his wife live in their own home but have a mortgage. 
[60]
When asked how the requirement to repay the debt would impact on the family the appellant's wife referred to the emotional impact it would have on the family. She referred to the sleepless nights and arguments that had arisen about the debt incurred during the period the family were in receipt of benefit. She also noted that when the Corporation advised the Ministry of the reinstatement of the appellant's ACC payments their benefit payments from the Ministry stopped immediately on 23 May. She said they did not receive any payment from ACC until 6 June. In effect the family were two weeks without income and they were obliged to use their credit cards for living expenses. 
[61]
We accept the appellant's wife's evidence that a significant impact of requiring recovery of the Accommodation Supplement debt in this case will be emotional. We accept that she will be the person who will need to deal with this. She is also obliged to deal with the daily needs of an autistic adult daughter and we have considerable sympathy for her circumstances. 
[62]
A person who successfully challenges a decision by the Corporation to cancel ACC payments experiences certain financial losses. They must live on the reduced income of a benefit compared with income from ACC while they endeavour to have ACC payments reinstated. In addition as previously noted, tax on the ACC payments is calculated in the year it is received. If the backdated ACC includes payment spanning two or more income tax years the recipient may pay more tax than they would have had the payments been paid when they ought to have been paid. The appellant has declined to provide the information which would have assisted in determining what extra tax he paid in this case. Nor are we aware of whether he received interest on his backdated payment to offset his losses. 
[63]
We further observe that the failure by the Ministry to provide good information about the calculation of the debt at the outset has contributed to the stress the appellant and his wife have experienced in relation to this matter. 
[64]
While it is unsatisfactory that we do not have a complete picture of the appellant's financial circumstances, taking into account all of the circumstances we direct that the Chief Executive take no steps to recover the overpayment of Accommodation Supplement on this occasion. 
[65]
The appeal as it relates to the recovery of Domestic Purposes Benefit — Care for the Sick and Infirm is dismissed. 
[66]
The appeal as it relates to the recovery of Accommodation Supplement is allowed. 


HC Wellington AP 335/01, 27 August 2002 
HC Wellington CIV 2006-485-837, 8 December 2006 
HC Wellington CIV 2006-485-837, 8 December 2006 
Buis v the Accident Compensation Corporation, HC AK CIV 2007-404-004703, 6 March 2009 
Reddell v Accident Compensation Corporation, HC AK CIV 2008-485-002736, 24 June 2009 
Hollis v the Commissioner of Inland Revenue, HC NP CIV 2009-441-00074, 30 October 2009 
Director General of Social Welfare v Attrill and others, [1998] NZAR368 
McConkey v Director-General of Work & Income New Zealand HC WN AP 277-00, 20 August 2002 
Cowley v Chief Executive of the Ministry of Social Development HC WN CIV-2008-485-381, 1 September 2008 
Osborne v Chief Executive of the Ministry of Social Development HC Auckland CIV-2007-485-2579, 31 August 2009 

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