Bredmeyer v Chief Executive of the Minstry of Social Development HC Wellington CIV 2007-485-105

[2007] NZHC 1561

IN THE HIGH COURT OF NEW ZEALAND WELLINGTON REGISTRY

CIV-2007-485-105

IN THE MATTER OF     an appeal by way of case stated from the determination of the Social Security Appeal Authority at Wellington under s12Q of the Social Security Act 1964

BETWEEN  AUDREY BREDMEYER Appellant

ANDTHE CHIEF EXECUTIVE OF THE MINISTRY OF SOCIAL DEVELOPMENT

Respondent

Hearing:         26 July 2007

Appearances: R C Laurenson for Appellant

C C Inglis for Respondent

Judgment:      20 September 2007

In accordance with r540(4) I direct the Registrar to endorse this judgment with the delivery time of 4.00 pm on the 20th day of September 2007.

RESERVED JUDGMENT OF GENDALL J

[1]      These proceedings concern the entitlement of the appellant to New Zealand superannuation whilst residing in Australia.   Mrs Bredmeyer  is  a  New  Zealand citizen  now  aged  69.     She  qualifies  for  New  Zealand  superannuation.     Her application was rejected because she was not entitled to a means tested Australian age pension because the assets of her and her husband exceeded the allowable limits

for an Australian age pension.

BREDMEYER V THE CHIEF EXECUTIVE OF THE MINISTRY OF SOCIAL DEVELOPMENT HC WN CIV-2007-485-105  20 September 2007

[2]      She appealed against the decision of a Benefits Review Committee of the Ministry to the Social Security Appeal Authority pursuant to s12J of the Social Security  Act  1964.    Her  appeal  was  dismissed  by  the  Authority  in  a  reserved decision dated 10 August 2006.  She appeals against that decision.  Such an appeal must be by way of case stated pursuant to s12Q of the Act and Part 11 of the High Court Rules.

Issue

[3]      The appeal concerns the interpretation of the Social Welfare (Reciprocity with Australia) Order 2002, which is an Order in Council adopting an agreement on social security reached between the Governments of New Zealand and Australia. The agreement is recorded in Schedule 1 to the Order in Council.  The question is whether a person who qualifies for New Zealand superannuation and resides in Australia receives  no  payment  if  he/she  does  not  qualify for  an  Australian  age pension.

The case stated

[4]      This Court is confined to the facts, findings and questions of law contained in a case stated.  The relevant parts of the case are:

“[4]      The appellant was born in New Zealand on 1 September 1937.  She lived    in    New    Zealand    until    May    1968    when    she    moved    to Papua New Guinea.  She moved to Australia in January 1990.  She continues to live in Australia.

[5]       On   21   June   2005   the   appellant   applied   for   New   Zealand

Superannuation.

[6]       The Chief Executive determined that the appellant met the age and residence criteria for New Zealand Superannuation.   In fixing the rate of New Zealand Superannuation payable to the appellant under the Reciprocal Agreement the Chief Executive had regard to the rate of Australian Age Pension payable to the appellant.

[7]       Centrelink Australia (the Australian equivalent of Work and Income New Zealand) determined that the appellant was not entitled to receive an Australian Age Pension on the grounds that the assets of herself and her partner exceeded the allowable limit.  Neither was the appellant entitled to a

Commonwealth Seniors Health Card as the income of the appellant and her partner was above the allowable limit.

[8]       The Chief Executive determined that because the rate of Australian Age  Pension  payable to  the  appellant  was  nil  the  rate  of  New  Zealand Superannuation payable to her was nil.

The Authority’s Findings

The Authority found that:

[9]       Article 9(3) requires the authorities to consider how much Australian Age Pension would be payable to the appellant and to pay her New Zealand Superannuation at a rate no higher than that amount.  As she was not entitled to receive Australian Age Pension it seems reasonable to conclude that the appellant could not receive New Zealand Superannuation.

[10]     The phrase in the Reciprocal Agreement “that would have been payable to that person if he or she was entitled to receive an Australian Age Pension” ties the rate of payment of New Zealand Superannuation to the rate of  payment  of  Australian  Age  Pension  calculated  on  the  basis  that New Zealand  Superannuation  is  not  taken  into  account  in  calculating entitlement to Australian Age Pension.

[11]      If the amount of New Zealand Superannuation payable was simply to be less than the maximum amount of Australian Age Pension payable then it would not have been necessary to add the words “if he or she was entitled to  receive  an  Australian  Age  Pension  but  was  not  entitled  to  receive New Zealand Superannuation or a Veterans Pension”.

[12]     The addition of the words “if he or she was entitled to receive an Australian Age Pension” appears to reinforce the notion that persons in Australia  who  might  be  eligible  for  New  Zealand  Superannuation  on residence grounds are not to be advantaged over persons who have spent all their working life in Australia.

[13]      On receiving advice that the rate of Australian Age Pension payable to the appellant was nil the Chief Executive of the Ministry was obliged to conclude that the rate of New Zealand Superannuation payable to the appellant was also nil.

[14]      The Chief Executive’s decision to decline payment of New Zealand

Superannuation to the appellant was correct. [15]  The appeal was dismissed. Questions of Law

The questions of law for the opinion of the Court are:

[i]Does Article 9.3 require an applicant for New Zealand Superannuation living in Australia and entitled to receive New Zealand Superannuation under Article 6 of the Reciprocal   Agreement   at   a   rate   to   be   calculated   in accordance  with  9.1  of  the  Agreement,  to  apply  for  an

Australian Age Pension in order to determine the rate of

New Zealand Superannuation he or she can receive?

[ii]      If an applicant for New Zealand Superannuation living in Australia  and  entitled  to  receive  New  Zealand Superannuation under Article 6 at a rate to be calculated in accordance with Article 9.1 fails the means test imposed by the Social Security law of Australia, is he or she nevertheless entitled under Article 9.3 to be paid New Zealand Superannuation at the lesser of the New Zealand Superannuation rate and the maximum Australian Age Pension rate as if he or she had not failed the means tests?”

Appellant’s contentions

[5]      Essentially, Mr Laurenson argued that a proper construction of Article 9.3, having regard to the purpose of the agreement, and the overall context of the legislation, means that a person who qualifies for New Zealand supernanuation in Australia, receives an amount which is not more than that what he/she would otherwise receive if notionally entitled to receive an Australian age pension. Conversely,  it  does  not  disqualify  a  person  otherwise  entitled  to  receive  New Zealand  superannuation  if  that  person  were  disqualified  from  receiving  the Australian age pension.

Ministry’s contentions

[6]      Counsel argued that an applicant for New Zealand superannuation who is resident in Australia is required to apply and have an assessment for an Australian age pension and the rate of New Zealand superannuation payable, if any, is determined by the Ministry having regard to the rate of Australian age pension nominally payable. That reflects the policy underlying the agreement which is aimed at  ensuring  that  a  person  who  lives  in  Australia,  having  previously  lived  in New Zealand,  is  not  advantaged  over  Australian  residents  who  have  lived  and worked all their lives in Australia.  Correspondingly, it is said that a person living in New Zealand, who had previously lived in Australia and obtained New Zealand superannuation, is not advantaged over other New Zealand residents.  The Ministry position, accepted by the Authority, was that it was inconsistent with the wording and policy objectives of the reciprocal agreement to interpret Article 9 as entitling an

applicant, who had failed a means test associated with the Australian age pension, to be paid New Zealand superannuation as if he/she had not failed that test.

Discussion

[7]      It   is   not   disputed   that   the   appellant   was   entitled   to   New   Zealand superannuation by virtue of her residence and deemed residence in New Zealand during her working age years.  Because she lives in Australia, the formula adopted entitled her to the equivalent of about 71% of New Zealand superannuation.  But the Ministry required her to apply for an Australian age pension.   Section 69G of the Social Security Act 1964 provides that an applicant for a benefit under the New Zealand Superannuation and Retirement Income Act 2001 must provide information establishing that the applicant has taken all reasonable steps to obtain any overseas pension to which he/she may be entitled or that may be granted to them.

[8]      Mrs Bredmeyer was not entitled to an Australian age pension because her and her husband’s assets exceeded allowable means test limits.  Unlike Australia, New Zealand superannuation is not means tested.

The Reciprocal Agreement and Article 9.3

[9]      In  its  broadest  terms  the  agreement  between  the  Governments  of  New Zealand and Australia is aimed to provide reciprocal age pensions, superannuation and veterans’ pensions to Australians and New Zealanders who live, respectively, in the other country.

[10]     Critical  to  the  appellant’s  case  is  the  proper  application  of  Article  9.3. Article 9 provides that a person resident in Australia who is entitled to receive New Zealand superannuation may receive a benefit that is calculated in accordance with a particular formula.  Article 9.3 provides:

“Where a person is entitled to receive New Zealand superannuation or a veteran’s pension under Article 6, the rate of New Zealand superannuation or veteran’s person shall be calculated under paragraph 1 but the amount the person is entitled to receive shall not exceed the amount of Australian age pension that would have been payable to that person if he or she was entitled

to  receive  an  Australian  age  pension  but  was  not  entitled  to  receive

New Zealand superannuation or a veteran’s pension.”

Some other provisions in the Reciprocal Agreement

[11]     It is not necessary to record the agreement in full.  However, it is relevant to note Article 4:

“Article 4  Equality of Treatment

Except as provided for in this Agreement, the persons to whom this Agreement applies shall be treated equally by each of the Parties in regards to rights and obligations that arise under the social security law of that Party or as a result of this Agreement.”

[12]     Article 6 (“Residence in Australia”) is also relevant.  It provides, in part:

“1.Where a person would be entitled to receive a benefit under the social security law of New Zealand (including a person who would be entitled under Article 8) except that he or she is not ordinarily resident  or  resident and  present  in  New  Zealand  on  the  date  of application for that benefit, that person shall be deemed, for the purposes of that application, to be ordinarily resident and resident and present in New Zealand on that date, if he or she:

(a)  is present either in Australia or New Zealand;

(b) is  an  Australian  resident,  including  a  person  who  has  the intention of remaining an Australian resident for at least one year or has been residing in Australia for at least 26 weeks;

(c)  has been a New Zealand resident at any time in his or her life for a continuous period of at least 1 year since attaining the age of

20 years; and

(d) in  the  case  of  New  Zealand  superannuation  or  a  veteran’s pension, is over the age of 65.

……    ”

[13]     The purpose of the reciprocal agreement is described in a preamble paragraph of the Agreement as being:

“to coordinate the operation [of the two countries’] respective social security systems  and  to enhance the  equitable access  by people  covered  by  this Agreement to specified social security benefits provided for under the laws of both countries;”

The “Incongruity” contention

[14]     Counsel for Mrs Bredmeyer contended that to allow the Ministry to adopt its present stance, supported by the Authority, leads to the absurd situation that:

•   A  New  Zealander  who  through  length  of  residence  in  New  Zealand qualifies for New Zealand superannuation is discriminated against if they live in Australia but do not meet the means test for an Australian age pension.

•   That imports a “means test”, through the back door, into the right to receive New Zealand Superannuation.

•   An Australian citizen who resides in New Zealand who meets the age and residency requirements, although required to apply for entitlement to the Australian Age Pension, will qualify for New Zealand superannuation even if he/she fails the means test for an Australian age pension.

•  So, an Australian who is not entitled to Australian age pension, but otherwise meets the New Zealand criteria, receives New Zealand superannuation according to a formula.  Yet a New Zealand citizen who qualifies for New Zealand superannuation but is not entitled to an Australian aged pension, although said to “qualify for or be entitled” to the former, receives nothing:  It is quaintly described as “entitled to a nil rate of payment”.

•   Counsel advised that if a New Zealand citizen entitled to New Zealand superannuation was residence in a country with which no reciprocal agreement applied, the payment rate would be at a level of 50%.

How should Article 9.3 be applied?

[15]      It is clear that the Reciprocal Agreement adopted by Order in Council under s19 of the Social Welfare (Transitional Provisions) Act 1990 has the effect of an

enactment.   If the purpose of the Regulation or Order is clear its text should be interpreted if possible to give effect to that purpose.  That is apparent from s 5(1) of the Interpretation Act 1999.  Its meaning has to be ascertained from the text and in light of the Agreement’s purpose with indications provided in the enactment to be among matters that may be considered; s 5(2) and (3) Interpretation Act 1999.

[16]   Where grammatical meaning and purpose are in harmony there is little difficulty, but if a  grammatical  construction does not  give effect to the evident purpose of the legislative provision the Court is required to search for a reasonable construction that gives effect to that purpose.  So, if a provision is ambiguous and unclear it obviously should be interpreted to further the legislative purpose, and in some cases a strained interpretation may be placed on words if the purpose of the provision requires it.   If the provision is obscure or badly drafted it should  be interpreted to give effect to the underlying purpose because Courts ought not to allow unskillfulness of a draughtsman to defeat the purpose.   But as J F Burrows

says in Statute Law in New Zealand (3rd ed) at p 146 the very phrase “purpose of the

Act” is itself not entirely free from difficulty.   It may refer to the theme of the legislation as enacted, but this type of “purpose” is little more than a summary of what the Act expressly says and may be called “the effect” as much as the Act’s purpose.

[17]     A phrase in a statute may sometimes be used to convey not the purpose as enacted, but rather the social, economic or other end or aim that Parliament hoped to achieve by the legislation.   Such a purpose is often only discernible from sources outside the legislation and the danger exists that a search for a purpose of this kind may descend  into  impermissible  judicial  legislation.    Hunia  v  Parole  Board  at Wellington (2001) 18 CRNZ 543 at 552.

[18]     A portion of an enactment likewise has to be interpreted so as to advance its purpose.   There may be extrinsic evidence, such as committee reports and Parliamentary Debates, which point to what that purpose is.  But judicial warnings are to be heeded about it being dangerous to assume rather than discover legislative purpose.   Whilst the purposive approach is a dominant approach to interpretation (Burrows, p 154) it has its limitations, as well as posing constitutional dangers also.

[19]     Here  the  Reciprocal  Agreement,  given  legislative  force  by  the  Order  in Council, had its genesis in a political compact between two Governments.  So, some recourse may be had to statements made on behalf of those Governments upon the promulgation or settling of the agreement.  But I keep in mind that the statements made are political utterances which come after the agreement was reached and not necessarily part of the “one legislative debate of considerations”.

The Joint Communiqué of the New Zealand and Australian Governments

[20]     The Prime Ministers of both countries in their joint communiqué said:

•   The agreement was to enable Australians and New Zealanders to be able to move freely between the two countries, with a free flow of people being the key factor in the integration of the economies of both.  And it said that:  “…our new social security arrangements will help underpin that free flow”.

•   “The new social security arrangements will resolve the current complex administrative arrangements and help ascertain the trans-Tasman social security costs that will in future be borne by us both….”

•   “Those  Australians  and  New  Zealanders  reliant  on  Australian  age pensions, New Zealand superannuation and veterans’ pensions can rest secure in the knowledge that continued payments of their entitlements is guaranteed regardless of on which side of the Tasman they choose to live.   Where people have spent part of their working lives in both countries, both governments will contribute to their retirement incomes, reflecting the shared responsibility we will bear for the costs involved and our desire for a  more transparent accountability.”

[21]     In a contemporaneous Joint Press Release the Prime Ministers said:

“Under the equity principle, New Zealand superannuitants in Australia will not be entitled to receive more than other Australian age pension beneficiaries, and vice versa.”

[22]     Mrs Bredmeyer, perhaps understandably, asks how it can be that she and others entitled to New Zealand superannuation would be encouraged to “free flow” to Australia, in the knowledge that because of the so called “equity” principle she must be treated as an Australian and subject to a means test?  The “free flow” may well arise the other way as Australians, who do not qualify for an age pension

because they do not meet the means test are eager to live in New Zealand and, if otherwise eligible, receive New Zealand superannuation, irrespective of their means.

[23]     Simply to state the proposition may illustrate Mrs Bredmeyer’s frustration, and her belief that the content of the Joint pronouncement contains some anomalies.

[24]     But, the principle of “equality” referred to in the pronouncements is not absolute as Article 4 provides:

“Except as provided for in this Agreement, the persons to whom this Agreement applies shall be treated equally by each of the Parties in regards to rights and obligations that arise under the social security law of that Party or as a result of this Agreement.”  (emphasis added)

The “equality” which seems to be envisaged is between those who reside in the same country, yet are entitled to superannuation, or pension, from their country of origin. It  cannot  be  “equality”  with  fellow  citizens  because,  otherwise,  the  wealthy Australian   residing   in   New   Zealand   and   being   entitled   to   New   Zealand superannuation is decidedly “unequal” and advantaged as against similarly situated New Zealand citizens living in Australia.

[25]     At first sight it is difficult to see how Article 9.3 would encourage people “to move freely between our two countries…to live and to settle” (Joint Communiqué) or will “enhance equitable access…to specified social security benefits” (Purpose Statement), if New Zealanders are deprived of New Zealand superannuation when they do not meet the Australian age pension means test.

[26]     But is it possible to read words into Article 9.3 to avoid frustrating that apparent purpose of the government?  Legislation may have a number of purposes, and one appears to be that superannuitants in Australia or New Zealand ought not receive more than counterparts in that country.

[27]     The difficulty is whether additional words can be included into Article 9.3, or a number of them removed, so as to alter its literal meaning.  Mr Laurenson argued that all that ought to be required is a notional rate to be assessed as if an applicant was  receiving  an  Australian  pension  as  compared  with  that  of  New  Zealand

superannuation, and that requires the word “that person” to be read as “a person”, and “if he or she was entitled” to be read as “if he or she had been entitled”.  That is the purely hypothetical situation.

[28]     Yet the further words at the conclusion of Article 8.9

“but was not entitled to receive New Zealand superannuation or a veteran’s pension”

can only refer to an Australian citizen resident in Australia and that is the test provided in Article 9.3 as the amount that would have been paid under an Australian pension.

[29]     Had   Mrs   Bredmeyer   not   been   entitled   to   receive   a   New   Zealand superannuation (through Australian citizenship or otherwise), that which she would have received in the event of applying for an Australian age pension would be nil. The concluding words after “payable to that person” can only be read to relate to the hypothetical amount that would have been paid to that applicant had he/she been a comparable  Australian  seeking  an  Australian  age  pension  when  not  entitled  to receive New Zealand superannuation.

[30]     I do not consider that the drafters of the Agreement inadvertently overlooked the “principle of equality” because of what they provide in Article 4. I do not think it’s open to call in aid the “reading in” or “omitting” approach so as to delete all words after “paragraph 1”; or to read “that person” as “a person”.  Lord Diplock’s oft-cited judgment in Jones v Wrotham Park Settled Estates Limited [1980] AC 74 at

105 is relevant here:

I am not reluctant to adopt a purposive construction where to apply the literal meaning  of  the  legislative  language  would  lead  to  results  which  would clearly defeat the purposes of the Act.  But in doing so the task on which a Court of justice is engaged remains one of construction, even when this involves reading into the Act words which are not expressly included in it….three conditions that must be fulfilled in order to justify this course [are]….First, it was possible to determine from a consideration of the provisions of the Act whether as a whole precisely what the mischief was that it was the purpose of the Act to remedy; secondly, it was apparent that the draughtsman and Parliament had by inadvertence overlooked, and so omitted to deal with, an eventuality that required to be dealt with if the purpose of the Act was to be achieved; and thirdly, it was possible to state

with certainty what were the additional words that would have been inserted by the draughtsman and approved by Parliament had their attention been drawn to the omission before the bill passed into law.   Unless this third course is fulfilled any attempt by a court of justice to repair the omission in the Act cannot be justified as an exercise of its jurisdiction to determine what is the meaning of a written law which Parliament has passed.   Such an attempt crosses the boundary between construction and legislation.   It becomes a usurpation of a function which under the constitution of this country is vested in the legislature to the exclusion of the courts.

[31]     Whatever the man or woman in the street might think about whether Article

9.3 surreptitiously brings a “means test” into assessment of New Zealand superannuation for those overseas, nevertheless a stated purpose that New Zealand superannuatants in Australia are not entitled to receive more by way of pension benefits than Australian counterparts, appears to be the clear purpose of Article 9.3 as it is worded.   The final words must refer to Australian citizens and residents, being those who are not entitled to receive New Zealand superannuation but entitled to receive the Australian age pension.

[32]     I can sympathise with the feelings of Mrs Bredmeyer and other New Zealand citizens in a similar situation, particularly as the international services division of the New Zealand Ministry has published material that contains the following comments on the effects of the Agreement:

“The  New  Zealand  benefit  or  pension  is  paid  without  regard  to  any Australian pension. The Australian pension is not directly deducted from the New Zealand benefit or pension before payment is made in Australia.”

[33]     It would have been more helpful for the note to go on to state that the amount paid in Australia would be nil if a person did not otherwise qualify for Australia’s means-tested pension.

[34]     But  to  read  in  to,  or  remove  words  from,  Article  9.3  as  the  appellant contends, would require the Court to move into the impermissible area of legislating, even if it be for subordinate legislation.  Article 9.3 clearly refers to the applicant for New Zealand superannuation and not a notional man or woman, despite necessarily referring to the hypothetical situation of  the  applicant  being a  person  who  was applying for an Australian age pension when not eligible for a New Zealand superannuation (i.e. an Australian).

[35]   Despite obvious difficulties I am driven to accept the validity of the respondent’s submissions that Article 9 of necessity requires that an application be made to assess an individual’s eligibilty for an Australian age pension, and that the rate of the superannuation payable is determined by the Ministry having regard to the rate of an Australian age pension that would otherwise have been nominally payable. This  reflects  the  policy of  ensuring  that  a  person  living  in  Australia,  who  had previously lived in New Zealand, did not receive greater benefits than Australian residents.  The fact is that an Australian living in New Zealand likewise would not obtain an advantage over New Zealand superannuitants.   They may be treated far more beneficially than Australian residents by reason of the different qualifying criteria for superannuation and pension, but that is their good fortune and is solely because the New Zealand entitlement is not means tested.

[36]     I  conclude  by  observing  that  the  enactment  is,  of  course,  subordinate legislation, not enacted by Parliament but promulgated by an Order in Council.  It is the exercise of a statutory power as defined by s 3 of the Judicature Amendment Act

1972 and as such is a power which may be amenable to review by the Courts.  But of course there is a presumption that an Order in Council is lawful.  This appeal is not about Judicial Review nor a challenge to the validity of the Order in Council.  It is simply an appeal by way of case stated and the Court is limited to the content of this case and the questions of law asked.   If the interpretation that the Ministry has adopted,  upheld  by  the  Authority  and  now  by  this  Court,  is  at  odds  with  the intentions of the Government when signing the Agreement, then, just as it enacted the  subordinate  legislation  by  Order  in  Council,  it  could  equally  remedy  any anomaly that might exist.

[37]     In the end it must be a matter of social and political policy.  Judges cannot comment  on  the  work  of  the  legislature  other  than  by  conforming  with  the convention of courtesy to other limbs of government.  An Order in Council is a little different to the work of Parliament.  The judiciary can draw concerns to the attention of the government or others, but any comment requires adherence to convention. Lord Bingham delicately phrased it in R (O’Brien) v Independent Assessor (2007) 2

WLR 544 at [31] as being to “express some reservations about the operation” of a section, or point out a matter which “perhaps merits consideration”.

[38]     Whilst recognising that this is a matter of social and political policy, as well as of international comity, the Ministry may pause to consider whether the present position should be clearly conveyed in its published material to all those who might be affected by the Order in Council, or to reflect upon the unusual situation of one group of possible beneficiaries under the Agreement being treated differently to another group – although only of course because of the different eligibility criteria existing in the two countries.

Conclusion

[39]     It follows that the decision of the Authority must be upheld and the questions answered in the case as follows:

a)       Does Article 9.3 require an applicant for New Zealand superannuation living  in  Australia  and  entitled  to  receive  New  Zealand superannuation under Article 6 of the Reciprocal Agreement at a rate to be calculated in accordance with 9.1 of the Agreement, to apply for an  Australian  age pension  in  order  to  determine  the  rate  of  New Zealand superannuation he or she can receive?

Answer:  Yes.

b)If an applicant for New Zealand superannuation living in Australia and entitled to receive New Zealand superannuation under Article 6 at a rate to be calculated in accordance with Article 9.1 fails the means test imposed by the social security law of Australia, is he or she nevertheless entitled under Article 9.3 to be paid New Zealand superannuation at the lesser of the New Zealand superannuation rate and the maximum Australian age pension rate as if he or she had not failed the means test?

Answer:  No.

Costs

[40]     I do not consider this to be a case where costs should follow the event.  It was a case which required determination by the Court, not just in the interests of Mrs Bredmeyer but many others.  There will be no order for costs.

“J W Gendall J”

Solicitors:        John Dean Law, Wellington for Appellant

Crown Law, Wellington for Respondent