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Accident Compensation Cases

Re SSA5/14 (SSAA, 20/11/14)

Judgment Text

DECISION 
Ms M Wallace - Chairperson, Mr K Williams - Member, Lady Tureiti Moxon - Member
Introduction 
[1]
The appellant appeals against decisions of the Chief Executive upheld by a Benefits Review Committee to: 
(i)
Treat the Child Weekly Compensation the appellant receives from the Accident Compensation Corporation as her income in assessing her entitlement to the Childcare subsidy and Out of School Care (OSCAR) subsidy she receives from the Ministry of Social Development. 
(ii)
Deduct the Child Care payments she receives from the Accident Compensation Corporation from the Childcare and OSCAR subsidies payable to her by the Ministry to ascertain the level of entitlement to Childcare Assistance. 
[2]
Terminology: in this decision the payments made by the Accident Compensation Corporation (the Corporation) pursuant to the Accident Compensation Act 2001 are referred to as ACC Child Weekly Compensation and ACC Child Care payments. The payments made by the Ministry of Social Development pursuant to the Social Welfare (Childcare Assistance) Regulations 2004 are referred to as Childcare subsidy and OSCAR subsidy and are collectively referred to as Childcare Assistance. 
[3]
This case concerns the appellant's entitlement to OSCAR and Childcare subsidies in circumstances where Child Weekly Compensation payments and Child Care payments from the Corporation are payable. 
Background 
[4]
The appellant is in full-time employment. At the time relevant to this appeal she was the principal caregiver of her three grandchildren who were aged 6, 10 and 12 years. The appellant was receiving Orphan's Benefit for one of the children and Unsupported Child's Benefit in relation to the two older children. She also received Child Weekly Compensation and Child Care payments from the Corporation in respect of the children. 
[5]
The appellant's grandchildren became entitled to the Child Weekly Compensation payments and the Child Care payments on 19 December 2010 as a result of the death of their mother. The payments received in respect of Child Weekly Compensation at the relevant time was $81.60 or $73.04 net per week. 
Childcare Assistance 
[6]
Childcare and OSCAR subsidies are provided for pursuant to the Social Security (Childcare Assistance) Regulations 2004 (the Regulations). 
[7]
Childcare subsidy can be provided for up to 50 hours per week to enable a child's parent or principal caregiver to pursue approved activities such as employment, be involved in a rehabilitation programme, employment-related training or a course of study. This level of subsidy can also be paid where the principal caregiver has a serious disability or illness. If the caregiver is neither engaged in an approved activity nor suffering from a serious illness or disability, assistance for a maximum of nine hours per week can be paid. 
[8]
The rate of Childcare subsidy is determined by regulation 18 and Schedules 1 and 2 of the Regulations. 
[9]
A further qualification is that the rate of Childcare subsidy payable must be no more than the actual hourly fee payable. 
[10]
OSCAR subsidy can be paid for children participating in approved programmes for up to 20 hours a week during term time and 50 hours a week during school holidays, provided the child's principal caregiver is participating in employment or one of the training or study activities referred to in regulation 21 of the Regulations or where the principal caregiver is suffering a serious illness or disability. 
[11]
Schedule 1 of the Regulations provides that the rates of Childcare and OSCAR subsidy payable are determined with reference to the household income before the deduction of income tax. 
[12]
The Regulations have their own set of definitions which are provided for in regulation 3. Regulation 3 defines “household income” as follows: 
“in relation to a child or the child's principal caregiver, means the sum of ? 
(a)
the total income of the child's principal caregiver; and 
(b)
whether or not he or she is also the child's other caregiver, the total income of the spouse (if any) of the child's principal caregiver ”
[13]
In short, the household income includes the income of the principal caregiver and the spouse of the principal caregiver. It does not include the income of the child. 
[14]
“Total income” is defined as follows: 
“in relation to a child's caregiver, means the sum of ? 
(a)
the caregiver's income; and 
(b)
the amount of any benefit (other than the childcare assistance, a child disability allowance, an orphan's benefit, or an unsupported child's benefit) received by the caregiver; and 
(c)
the amount of any child support received under the Child Support Act 1991 by the caregiver ”
[15]
The term “childcare assistance” used in the definition of ‘total income’ in the Regulations is also defined in regulation 3 as meaning “a childcare subsidy or an OSCAR subsidy”
Child Weekly Compensation 
[16]
The first issue is whether or not the Child Weekly Compensation received by the appellant in respect of each child should be included in calculating entitlement to Childcare subsidy or OSCAR subsidy. 
[17]
Child Weekly Compensation payments are payable pursuant to the provisions of clause 70 of Schedule 1 of the Accident Compensation Act 2001 which provides that the Corporation is liable to pay weekly compensation to a child of a deceased claimant. The amount of the payment is 20% of the loss of earnings or potential earning capacity of the deceased parent. The Corporation is liable to the child for the payment, suggesting the compensation is the income of the child. 
[18]
Section 125 of the Accident Compensation Act 2001, however, requires that the entitlement of a child under 16 years of age must be paid to the child's caregiver who must apply it for the maintenance, education, advancement, or benefit of the claimant. 
[19]
In Bramwell v Director General of Social Welfare,1
| X |Footnote: 1
HC, Auckland AP28-SW00, 28 June 2000, Gendall J
the High Court considered whether Child Weekly Compensation payments were the income of the child or the caregiver for the purpose of calculating entitlement to Orphan's Benefit or Unsupported Child's Benefit. The Court found: 
“In those circumstances it simply cannot be said that the income is other than that of the child. It does not belong to the estate of the deceased. Nor does it belong to the child's grandmother. It comprises payments which in law in fact are the entitlement of the child. In those circumstances it simply is not possible to say that the compensation payments, not being the personal earnings of the child, are nevertheless the income of the appellant. ”
[20]
In this case the issue is whether the payments received on behalf of the children are the income of their caregiver, the appellant, for the purpose of assessing entitlement to Childcare subsidy. 
[21]
We note as follows: 
(a)
The payments are the entitlement of the child, and the appellant is obliged to use them for the maintenance, education and advancement of the child. 
(b)
Unlike Unsupported Child's Benefit and Orphan's Benefit which are abated by the earnings of the child, Childcare Assistance is abated according to the income of the principal caregiver and their spouse (if any). There is no suggestion that the income of the child should be taken into account. 
(c)
It would be unusual for money received on behalf of someone else to be regarded as the recipient's income. 
(d)
In Bramwell, the Chief Executive argued that the Child Weekly Compensation payments were the income of the child and the High Court agreed with the Chief Executive. 
(e)
It would be unusual for the payments to be treated as the child's income for the purpose of the Orphan's Benefit and Unsupported Child's Benefit on the one hand but the income of the child's caregiver for the purpose of the Regulations, unless there was a clear requirement to do so. 
[22]
There is nothing in the Regulations which persuades us that we should disregard the finding in Bramwell that the Child Weekly Compensation payments are the income of the child and therefore should not be treated as the appellant's income for the purposes of assessing entitlement to either Childcare subsidy or OSCAR subsidy. 
[23]
The Regulations require the “household income” be taken into account in assessing entitlement to Childcare and OSCAR subsidy. The definition of household income does not include the child's income. 
[24]
The Chief Executive was wrong to treat the Child Weekly Compensation payments as part of the total household income in calculating the appellant's entitlement to Childcare and OSCAR subsidies. 
ACC Child Care payments 
[25]
Clause 76 of Schedule 1 of the Accident Compensation Act 2001 provides that the Corporation is liable to pay the child of a deceased claimant a payment for child care. There is no definition of Child Care payment in the Accident Compensation Act 2001 but there is a definition of ‘child care’ contained in section 6 of that Act. It provides that “child care means personal or supervisory care of a child in New Zealand”. This definition is reflected in the payments made. 
[26]
Child Care payments are not calculated according to the child care hours paid for by the child's caregiver. Rather, they are a global amount calculated according to the number of children of the deceased claimant entitled to the payment. The amount changes from time to time in accordance with the Consumer Price Index. In the present case the amount is a specified sum divided by three. These payments are generally available for only five years after the date on which entitlement started unless the child has special needs. Clause 78 of Schedule 1 provides that every payment for child care must be made to a person who is responsible for arranging the child's care. We understand that in 2013, $62.56 per child per week was paid by the Corporation to the appellant in respect of Child Care payments. 
[27]
A feature of the ACC Child Care payment is that the entitlement arises regardless of whether or not the child receives any formal supervisory childcare. There is no requirement that the child actually attend a registered early-childhood education centre or an OSCAR programme. The payment can be used for any form of child care that the child receives. In this case, if the appellant attends an evening meeting or goes out on a social occasion she may need to employ a babysitter. Likewise, if the child is at home sick or if the appellant needs to take one child to an appointment leaving the others at home, she may pay someone to look after the children. The appellant can retain the payment for her own care of the children. There is no requirement that it be paid to another party for child care. 
[28]
We also observe that even if the appellant were to receive both ACC Child Care payments and the Work and Income Childcare Assistance, she may be left with some child care costs. 
[29]
Childcare and OSCAR subsidies provided for under the Regulations are provided primarily to enable a principal caregiver to participate in an approved activity, including employment or training for employment. The eligible child must be attending an approved early-childhood education programme or OSCAR programme. 
[30]
In making the decision to deduct the Child Care payments received from the Corporation from entitlement to Childcare Assistance, the Chief Executive relies on regulation 5A which states: 
“Childcare assistance is not payable in respect of any hour of a child's participation in an approved early-childhood education programme or OSCAR programme if, for that hour, payment other than childcare assistance is made towards the costs of the child's participation in the programme through a funding programme — 
(a)
that is provided by the Government in order to purchase hours of childcare; and 
(b)
under which the amount provided per hour for childcare exceeds the hourly rate of childcare assistance as calculated under regulation 6. ”
[31]
It is submitted on behalf of the Chief Executive that the intent of regulation 5A is that a person should not be able to claim two sources of Government funding for the same hours of childcare. It is submitted that the ACC Child Care payments are part of a programme that is provided by the Government in order to purchase hours of childcare. 
[32]
It appears however, that the Ministry has had difficulty in interpreting the Regulations as it has used at least two different mechanisms for calculating entitlement to Childcare Assistance. One of these is set out in para 2.7 at Table 2. The other is in para 6.3.1 and 6.24 of the Ministry's “Section 12K” report. According to paras 6.3.1 and 6.24 of the report, the correct approach to the appellant's entitlement is to calculate the amount of Childcare subsidy that would be payable in accordance with the Regulations (excluding the ACC Child Care payments as income) and deduct the ACC Child Care payment from the assessed rate of Childcare subsidy. If the amount of ACC Child Care payment exceeds the rate of Childcare subsidy then no subsidy payment is made. After applying the direct deduction, the Ministry treats any excess ACC Child Care payment as the income of the principal caregiver. Surprisingly, no attempt was made in the Section 12K report to interpret the Regulations to justify this approach. 
Regulation 5A 
[33]
Regulation 5A of the Regulations provides that Childcare Assistance is not payable in certain circumstances. These circumstances are: 
(a)
where for any hour of a child's participation in an approved programme payment is made towards the cost of participation in the programme; and 
(b)
the assistances comes from another Government programme provided to purchase hours of childcare; and 
(c)
the amount provided per hour exceeds the hourly rate of Childcare Assistance as calculated under regulation 6. 
[34]
We note the following: 
(i)
Regulation 5A applies where payment is made towards the cost of participation in a childcare programme by another Government programme. 
(ii)
The provision does not require that other Government programmes be for the purpose of participation in an early childhood or OSCAR programme. All that is required is that the other Government programme provide funds for the purchase of hours of childcare. 
(iii)
Childcare is commonly paid for by the hour. A lump sum payment for childcare is capable of being used to purchase hours of childcare. 
(iv)
While the Corporation is not a Government department, it is in effect a Government entity created by Government and controlled by Government. We accept that the money for childcare provided by the Corporation is part of a Government programme. 
(v)
Payment of Childcare Assistance is only prevented when the hourly rate provided by the other programme exceeds the hourly rate of Childcare Assistance calculated under regulation 6. 
Regulation 6 
[35]
We then turn to consider regulation 6. Regulation 6 provides: 
“6
Assistance to be no more than hourly fee payable 
(1)
The hourly rate of childcare assistance paid in respect of a child's participation in an approved early-childhood education programme or OSCAR programme must be — 
(a)
no more than the actual hourly fee payable (or, if subclause (2) applies, the averaged hourly fee payable) for that participation; or 
(b)
where regulation 10 applies, the higher of the fee charged for keeping open the child's place in the programme and the hourly fee calculated under paragraph (a). 
(1A)
For the purposes of subclause (1), the actual hourly fee payable for a child's participation in a programme does not include any payment made by a person other than the applicant towards the fee payable in respect of that child's participation in the programme. 
(2)
If a periodic flat fee is payable for a child's participation in a programme, or for keeping open a child's place in a programme, the averaged hourly fee payable for the purposes of subclause (1) is the amount obtained by — 
(a)
subtracting from that flat fee any payment made by a person other than the applicant towards the flat fee; and 
(b)
dividing the amount calculated under paragraph (a) by the number of hours during the period concerned for which the child is enrolled to participate in the programme. 
(3)
This regulation is subject to regulation 5A. ”
[36]
In summary, regulation 6 requires that: 
(a)
The hourly rate of Childcare Assistance must be no more than the actual hourly fee payable. 
(b)
Where some other person makes a payment towards the fee, the actual hourly fee payable is calculated by reducing the fee by the amount paid by the other person. 
(c)
Where a flat fee is payable, the actual hourly fee payable is obtained by averaging. 
Regulation 6(1A) 
[37]
Regulation 6(1A) is of particular importance in this case. Regulation 6(1A) provides that: 
(a)
The fee payable for the child's participation in the programme is to be reduced by any amount paid by a person other than the applicant. 
(b)
The term “person” is defined in the Interpretation Act 1999 as follows: 
“Includes a corporation sole, a body corporate, and an unincorporated body ”
In short, the term “person” covers the Corporation. 
(c)
The Childcare Assistance for the child must be reduced by the amount received from the Corporation to ascertain the “actual hourly fee” payable for participation in the programme. 
[38]
Regulation 3 provides that the term “Childcare Assistance” means Childcare subsidy or OSCAR subsidy. 
[39]
There are two ways in which the “actual hourly fee” required under regulation 6(1)(a) can be calculated: 
(a)
The hourly fee paid by the Corporation is ascertained by dividing the ACC Child Care payment by the number of hours childcare received. Using the example in Table 2 of Cameron's School Term Care from 4 February 2013, this calculation is as follows: ACC $62.56 ÷ 14 = $4.46 per hour. Deduct $4.46 from $9 per hour (the fee paid to the provider). The “actual hourly fee” payable referred to in regulation 6(1)(a) is $4.54. 
Alternatively: 
(b)
The global amount received from the Corporation ($62.56) is deducted from the total childcare fee paid ($126). This gives the figure not covered by the ACC payment of $63.44. Divided by 14, this gives a figure of $4.53. 
[40]
In effect, there is little difference in the result as to what constitutes the “actual hourly fee”. As there is an emphasis in both regulation 5 and 6 on ascertaining an hourly fee, we consider the calculation mechanism in example (a) is preferable. 
Childcare Assistance 
[41]
Regulation 6 is a mechanism for capping the Childcare Assistance payable. The heading gives guidance to the purpose: “Assistance to be no more than hourly fee payable”
[42]
Having ascertained under regulation 6(1A) the actual hourly fee payable, we return to consider regulation 5A(b). Regulation 5A(b) provides that where the amount provided by the Corporation exceeds the hourly rate of Childcare Assistance as calculated under regulation 6, no Childcare Assistance will be payable. 
[43]
What is clear from regulation 5A(b) and regulation 6 is that: 
(a)
Where ACC Child Care payments exceed the actual hourly fee payable, no Childcare Assistance is payable. 
(b)
The actual amount of the Childcare Assistance must not exceed the actual hourly fee payable. 
[44]
The inference that can be drawn from these two requirements is that where the hourly fee paid by the Corporation is less than the actual hourly fee payable (as calculated under regulation 6(1A)) then Childcare Assistance will be payable. The question is, what rate of Childcare Assistance is payable? 
[45]
Regulation 6 is not the only mechanism which must be considered in calculating Childcare Assistance. 
[46]
Generally speaking, the amount of Childcare Assistance is calculated under the schedules to the Regulations. Childcare Assistance is paid according to income and the number of dependent children of the applicant. A person on a lower wage receives a higher amount than a person on a higher wage. In the appellant's case the appropriate hourly rate based on her income and the number of children in her care was assessed to be $3.98 per hour. 
[47]
We infer that the Chief Executive must first look at the Childcare Assistance available under the schedule and then, to ensure compliance with regulation 6 where necessary, reduce the hourly rate of Childcare Assistance to the “actual hourly fee payable” where necessary, to ensure this amount is not exceeded. 
[48]
Where the Childcare Assistance calculated pursuant to the schedule is less than the “actual hourly fee payable”, then the Childcare Assistance remains at the rate payable under the schedule. Where the Childcare Assistance hourly rate is more than the “actual hourly fee payable”, it must be reduced to the amount of the “actual hourly fee payable”
[49]
Taking Table 2 in paragraph 2.7 of the Ministry report as an example, this works as follows: 
(i)
Example 1 — Cameron school term care 
Fee payable to provider 
$9.00 per hour 
Less ACC Child Care payment 
$4.46 per hour 
Actual hourly fee payable 
$4.54 
In this example the hourly rate paid by the Corporation is less than the actual hourly fee payable. It is also more than the $3.98 subsidy the appellant is entitled to receive under the schedule. Childcare Assistance is therefore calculated at $3.98 per hour for 14 hours per week. In effect, of the total fees of $126 per week, $62.56 is paid by ACC Child Care payment and $55.72 is received in respect of Childcare Assistance making the total received $118.28. The appellant is left to pay the balance. 
(ii)
Example 2 — Cameron holiday care 
Fee payable to provider 
$5.66 per hour 
Less ACC Child Care payment 
$2.60 per hour 
Actual hourly fee payable 
$3.06 
Childcare Assistance must be reduced to $3.06 per hour so that the subsidy payable is no more than the actual hourly fee payable. The total fee is $136. Of this, $62.56 is covered by the ACC payment. $73.44 is paid by Childcare Assistance. 
(iii)
Example 3 — Cameron school term 2 care 
The hourly rate paid by the Corporation is $8 per hour and is more than the actual hourly fee payable. No Childcare Assistance is payable. 
(iv)
Example 4 — Sean holiday care 
Fee payable to provider 
$4.66 per hour 
Less ACC Child Care payment 
$1.73 per hour 
Actual hourly fee payable 
$2.93 
The Childcare Assistance payable is $2.93 per hour rather than $3.98. In this scenario the total subsidy is $105.48 plus ACC payment of $62.56 which results in total assistance of $168.04. The actual fees are $168. 
[50]
In summary, Regulation 6 is a mechanism for capping Childcare Assistance so that the combination of the ACC Child Care payment and the Childcare Assistance do not exceed the “actual hourly fee payable”
[51]
The Regulations do not support either the approach outlined in para 2.7 or 6.24 of the Section 12K report. 
[52]
If it was intended that the ACC Child Care payment simply be deducted from entitlement to Childcare Assistance, as is now submitted on behalf of the Chief Executive, it would have been a simple matter to provide that the amount paid by the other person be deducted directly from the Childcare Assistance payable. The Regulations do not do so and regulation 6 would be redundant if this were the intention. There would, for example, be no need to calculate the “actual hourly fee payable”
Childcare payments as income 
[53]
Finally, an issue arises as to whether ACC Child Care payments should be treated as the appellant's income. As with Child Weekly Compensation, the Corporation is liable to “pay a child”, not the child's caregiver. The actual payments must, however, be payable to a caregiver. In effect the provision is the same as for Child Weekly Compensation payments. 
[54]
On the basis of the decision in Bramwell, we conclude that the payments are not the appellant's income. They are the child's income and as the child's income is not included in the definition of “total household income” it should not be taken into account in assessing Childcare Assistance entitlements. 
Summary 
1.
Child Weekly Compensation and ACC Child Care payments are the income of the child. They are not the income of the child's caregiver and therefore not part of the “total household income” for the purpose of calculating Childcare Assistance. 
2.
The approaches outlined in the Section 12K report relating to the calculation of Childcare Assistance are not in accordance with the Regulations. 
3.
The Chief Executive is directed to recalculate the appellant's Childcare Assistance entitlement based on the method outlined in this decision. 
[55]
The appeal is allowed. 
[56]
The appellant is invited to make submissions on costs. 


HC, Auckland AP28-SW00, 28 June 2000, Gendall J

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