Davis v Chief Executive of the Ministry of Social Development HC Wellington Civ-2011-485-000118

[2011] NZHC 910

IN THE HIGH COURT OF NEW ZEALAND WELLINGTON REGISTRY

CIV-2011-485-000118

IN THE MATTER OF      an appeal by way of case stated from a decision of the Social Security Appeal Authority

BETWEEN  TANIA DAVIS Appellant

ANDTHE CHIEF EXECUTIVE OF THE MINISTRY OF SOCIAL DEVELOPMENT

Respondent

Hearing:         30 June 2011

Counsel:         N C King for Appellant

A L Russell and N E Gray for Respondent

Judgment:      5 July 2011

In accordance with r 11.5 I direct the Registrar to endorse this judgment with the delivery time of 3.30pm on the 5th day of July 2011.

RESERVED JUDGMENT OF GENDALL J

[1]      This is an appeal by way of case stated from a determination of the Social Security Appeal Authority (the Authority) made on 16 November 2009.  A party to proceedings before the Authority, if dissatisfied with any determination of it as being wrong in law may appeal to the High Court but only by way of case stated on a

question of law, under s 12Q of the Social Security Act 1964.

DAVIS V THE CHIEF EXECUTIVE OF THE MINISTRY OF SOCIAL DEVELOPMENT HC WN CIV-2011-

485-000118 5 July 2011

Background

[2]      The appellant received a Domestic Purposes Benefit between 2002 and 2004 which the Chief Executive initially contended was obtained through fraud.   She obtained $16,481.77.  The appellant faced charges under the Crimes Act 1961 and the Social Security Act 1964 alleging that she dishonestly obtained the benefit.  She was acquitted after a jury trial.  The Chief Executive determined that there had been overpayment because the appellant was not entitled to have received the benefit.  She appealed to the Authority, which as a preliminary matter said that no issue estoppel arose and that it was not an abuse of process for the Chief Executive to require refund of overpayment.

The facts

[3]      This Court is bound by the facts contained in the case stated:

[5]       On 16 August 2002 the appellant applied for Domestic Purposes Benefit.  In her application the appellant indicated that she was caring for a dependent child, her son Edwards who at that time was aged nearly 16 years. The appellant was interviewed in connection with her application.  The case manager noted in relation to that interview that the reason for the application was “child back in care”.  As a result of her application the appellant was granted Domestic Purposes Benefit and Accommodation and Supplement on the basis of her caring for her son.

[6]       This grant of Domestic Purposes Benefit was cancelled from 30 July

2002 when the appellant returned to work.

[7]      The appellant re-applied for Domestic Purposes Benefit and Accommodation Supplement on 29 August 2003.   In her application the appellant  indicated  that  her  son  was  in  her  care  and  living  with  her. Domestic Purposes Benefit was re-granted from 9 August 2003.

[8]       In  December  2003  the  Ministry  received  an  allegation  that  the appellant was working and that her son had not been in her care for the previous 2½ years.

[9]       Ministry records indicate that in any event the appellant‟s Domestic Purposes Benefit was suspended on 5 January 2004 because the appellant had not returned the “end of school year” forms for her son who was by then aged 17 years.

[10]      The  appellant‟s   Domestic  Purposes  Benefit  was  cancelled  on

28 February 2004.

[11]      Further information was obtained in relation to the whereabouts of

the appellant‟s son during the relevant period.

[12]      As a result it was determined that the appellant‟s son had not been in her care when she applied for Domestic Purposes Benefit on either occasion and an overpayment of $16,481.77 was established.

[13]      In December 2004 the Ministry laid a number of charges against the appellant.  The Authority understood that the appellant faced three charges under s 229A(b) of the Crimes Act 1961, three charges under s 127 of the Social Security Act 1964 and one charge under s 228 of the Crimes Act

1961.

[14]      The appellant entered pleas of not guilty.  The matter proceeded to a District Court jury trial on 29 May 2006. The appellant was found not guilty of the charges in the indictment.

[15]     Subsequently the appellant questioned the Ministry‟s pursuit of the overpayment against her.   This was treated as a request for a review of decision in relation to the debt.  The decision was reviewed both 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.

The Authority’s findings

[4]      The Authority made certain findings in its decision, which was made on the papers.  The Authority concluded that the doctrines of res judicata and issue estoppel did not prevent the Chief Executive from determining that the appellant was not

entitled to receive the Domestic Purposes Benefit. Amongst its reasons were:

the parties were the same as those involved in the appellant‟s criminal

proceedings;

it said it was prepared to accept it would have been fundamental for the jury to find the appellant‟s son was in her care during the relevant period so it was “prepared to accept therefore that the issues in the proceedings before the Authority will be the same as those before the jury in the criminal trial”.  (That is not necessarily correct and I return to deal with

that point later at [10]);

the  standard  of  proof  to  be  applied  by  the  Chief  Executive  and  the

Authority was on the balance of probabilities whereas in the District

Court criminal proceedings it was beyond reasonable doubt, so there was not sufficient co-extensiveness of proof so that the issue estoppel or res

judicata arises;

it was not an abuse of process for the Chief Executive to seek repayment

on the basis that the appellant‟s son was not in her care.

[5]      The Authority then set out the issues that were required to be determined by it in considering the appeal.  I am advised from the bar that in fact the appellant has withdrawn her appeal.

[6]      The question of law contained in the case stated is as follows:

Did the Authority err in law in holding that issue estoppel or the principle of res judicata did not prevent the Chief Executive from asserting that the appellant was not entitled to receive the Domestic Purposes Benefit during the relevant period and seek to recover an overpayment?

Discussion

[7]      The offences with which the appellant was charged were offences against ss 228 and 229A(b) of the Crimes Act 1961 and s 127 of the Social Security Act

1964.  Section 229A(b) was repealed as from 1 October 2003 but was in force during the offending alleged against the appellant.   Both it and s 228 relate to crimes of dishonestly and without colour of right using or attempting to use documents for the purpose of and with the intention of obtaining a benefit or pecuniary advantage. Section 127 of the Social Security Act makes it an offence to make a statement knowing it to be false or wilfully doing anything for the purpose of misleading or attempting to mislead a departmental officer for the purpose of receiving a benefit.

[8]      The principles of res judicata and issue estoppel are well known.  They are set  out  in  Maxwell  v  Commissioner  of  Inland  Revenue1    and  Gregoriadis  v

Commissioner of Inland Revenue:2

1      Maxwell v Commissioner of Inland Revenue [1962] NZLR 683 (SC).

2      Gregoriadis v Commissioner of Inland Revenue [1986] 1 NZLR 110 (CA) at 114.

Where  a  final  judicial  decision  has  been  pronounced  by  a  Court  of competent jurisdiction any party to that litigation is estopped in any subsequent litigation as against any other party to the earlier proceedings from disputing or questioning the first decision on the merits ...  In a case such as the present in order to found an estoppel per rem judicatam there must  be  (i)  identity  of  parties;     (ii)  identity  of  subject-matter;     and (iii) sufficient co-extensiveness of the standard of proof.

[9]      It was accepted that the parties were the same, with the Chief Executive being the complainant in the criminal proceedings and acting in the exercise of his discretionary powers in requiring repayment under the Social Security Act.

[10]     Although the Authority said it was prepared to accept that the issues before the jury were the  same  as  those  before  the Authority,  on  the basis  that  it  was fundamental for the jury to find the appellant‟s son was in her care between specific dates, in reaching its verdict, I consider that the Authority erred in that conclusion. As it observed, it is difficult to determine precisely (and often ever) the reasons for a jury returning verdicts of “not guilty” in criminal proceedings.   To convict, a jury must be satisfied beyond reasonable doubt as to all the necessary elements that go to make up the crime charged.  If not so satisfied to that standard it will acquit.  Where there are elements of intention where it must be proved, such as that an accused acted “without claim of right” or “dishonestly” or “wilfully” to achieve a particular purpose, then it would have been open to the jury to find that the appellant‟s son was not in her care but that in using or making the documents it had not been proven to the required standard that she had the necessary dishonest intent or absence of belief in colour of right.

[11]     The position is different where the fact of a conviction is challenged in a civil “re-litigation” process.   In Maxwell v Commissioner of Inland Revenue, Cleary J said:3

... argument involves, of course, the proposition that an acquittal on a prosecution may be relied upon as a ground of estoppels in subsequent civil proceedings.   It has been said more than once that the circumstances in which this may be possible must be very rare, either because the parties to the two proceedings are different, or because the onus of proof is different, or because it is not known upon what ground the acquittal may have proceeded when the criminal charge alleged required the proof of two or more elements in order to constitute the offence.

3      At 706.

To determine whether there is identity of subject-matter requires first that there be a careful examination as to what was judicatam when the appellant was acquitted on the informations, each charging him that he did wilfully make a false return in respect of a particular year.   It was essential for the conviction of the appellant both that the returns should have been incorrect and should have been known to the appellant to be such.  An acquittal might therefore be based on either ground.   Ordinarily an acquittal ascertains no fact as a conviction does inasmuch as it establishes no more than that some ingredient necessary to constitute the offence was not proved.

[12]     The issue in Maxwell was whether a prosecution for wilfully making false tax returns (which resulted in acquittal) was the same issue as the action taken by the Commissioner to recover amount of tax assessed.  The issue on the prosecution was different from that before the Court.  The prosecution issue was “Did the appellant make a wilfully false return?”   But the issue in the civil proceeds was “Does the appellant owe the money claimed?”  That is precisely the case here.  Ms Davis was acquitted of wilfully and dishonestly completing applications or documents to secure a pecuniary advantage.   Yet the issue now is “Does Ms Davis owe the money claimed as a debt due by her by reason of overpayment under s 85A because she had

no entitlement to that payment?”5

[13]     Recently, in Z v Dental Co Complaints Assessment Committee the Supreme

Court said:6

It is true that there is a rule of policy that the use of a civil action collaterally to  attack  a  subsisting  conviction  of  the  plaintiff  is  usually  an  abuse  of process.  But this rule does not extend to the questioning of acquittals.  The reason for this is that:7

“The general verdict of not guilty decides nothing more than that there was a failure upon the part of the prosecution to establish all the necessary ingredients.   It negatives every offence of which the accused could properly be found guilty on that particular indictment

. . . In R v Salvi (1857) 10 Cox CC 481n, Sir Frederick Pollock CJ

said:  „Acquittal of the whole offence is not acquittal of every part of

it;  it is only an acquittal of the whole‟ (ibid, 483n).”

4      At 695.

5      Social Security Act 1964, s 85A(f)(i) and (ii).

6      Z v Dental Complaints Assessment Committee [2008] NZSC 55, [2009] 1 NZLR 1 at [125].

7      Re a Medical Practitioner [1959] NZLR 784 (CA) at 800 per Gresson P.

[14]     Mr King relied upon the authority of  Hunter  v Chief Constable of West Midlands,8 which established that the Court can strike out, as an abuse of process, a second civil action in which a plaintiff seeks to re-litigate issues decided against him in earlier proceedings where such re-litigation would be manifestly unfair to a defendant or bring the administration of justice into disrepute.  And later remarks by Lord Browne-Wilkinson in Arthur J S Hall & Co (a firm) v Simons:9

... in my judgment where the later civil action must, in order to succeed, establish that a subsisting conviction is wrong, in the overwhelming majority of cases to permit the action to continue would bring the administration of justice into disrepute.   Save in truly exceptional circumstances, the only permissible challenge to a criminal conviction is by way of appeal.

But these were civil cases which sought to impugn the evidence of a conviction, which  as  has  been  seen  involves  different  considerations  to  the  present  case, involving a prior acquittal.

[15]     Mr King as part of his argument said that if the Ministry or the Crown did not accept the verdict of acquittal then they should have challenged it by appealing.  But right of appeal on the part of the Crown in this criminal case, in respect of verdicts of acquittal,  could  only arise  under ss  380  and  382  where the Judge may reserve questions of law for the opinion of the Court of Appeal for offences proceeded with indictably and there was no general right of appeal available to the Crown against a verdict of acquittal.

[16]     Mr King argued that in order to require repayment or refund of the benefit said to have been overpaid the Ministry had to assert the same proposition that was in the criminal case, namely that the appellant dishonestly completed false applications and as that had been conclusively determined to be not the case in the criminal proceedings it was an abuse of process for the Chief Executive to attempt to do so.  That submission is not accepted.  The essential basis upon which repayments may be  required  is  pursuant  to  s  85A of the  Social  Security Act  1964  and  an overpayment is a debt due to the Crown.  Repayment depends, not upon dishonesty

or criminal intent, but solely because the recipient had no entitlement to it.

8      Hunter v Chief Constable of West Midlands [1982] AC 52 (HL).

9      Arthur J S Hall & Co (a firm) v Simons [2002] 1 AC 615 (HL) at 685.

[17]     Mr  King  submitted  that  the  Authority  was  wrong  to  conclude  that  the standard of proof and matters before it was on the balance of probabilities.  He said that it was close to beyond reasonable doubt as required in a criminal case and he relied upon Gregoriadis v Commissioner of Inland Revenue.  There it was held that although penal tax proceedings under the Land and Income Tax Act 1954 were civil, they were based on fraud and the gravity of the allegation meant that the standard of proof required closely approximated the criminal standard.

[18]     But here the Chief Executive is not seeking to invoke penalty provisions, being punishment for dishonesty.  In any event, the Supreme Court has made it clear that the standard of proof of balance of probabilities applies in civil proceedings irrespective of what is alleged.  In Z v Dental Complaints Assessment Committee:10

The civil standard has been flexibly applied in civil proceedings no matter how serious the conduct that is alleged.  In New Zealand it has been emphasised  that  no  intermediate  standard  of  proof  exists,  between  the criminal and civil standards, for application in certain types of civil case. Balance  of  probabilities  still  simply  means  more  probable  than  not. Allowing the civil standard to be applied flexibly has not meant that the degree of probability required to meet this standard changes in serious cases. Rather,  the  civil  standard  is  flexibly  applied  because  it  accommodates serious allegations through the natural tendency to require stronger evidence before being satisfied to the balance of probabilities standard.

[19]     In this case if it be that the appellant had no entitlement to the Domestic Purposes Benefit, irrespective of how she came to receive that payment, then it is a debt due which may be the subject of the repayment requirement.

[20] Counsel for the Chief Executive contended that because the Authority has power to admit evidence not admissible in a Court or in the criminal proceedings, and it had investigative powers of a Commission of Inquiry, for those reasons there was not “co-extensiveness of proof”. That is a matter adverted to by the Authority in its reasons at [24]. I am not sure that that factor actually impinges upon the standard of proof or satisfaction required, which must still be on the balance of probabilities.

It is more directed to the point that the ambit of inquiry, and whether the evidence

10 At [102].

obtainable,  and  to  be  possibly  considered  by  the  Authority,  is  far  wider  than permitted in the Court.  That may not assist in determining whether issue estoppel or res  judicata  is  applicable  because,  in  the  end,  whatever  may  be  admissible  in evidence or considered by the Chief Executive, the test still remains on the balance of probabilities.  But I accept that because a wide-ranging inquiry is permitted and available to the Chief Executive, proof on the balance of probabilities will more easily arise than proof to the criminal standard.

Conclusions

Whilst the parties are the same, the issues are not.  The Authority erred (but

on the side of the appellant) in having that view.

Theissue was whether the appellant had no entitlement to the Domestic Purposes Benefit, irrespective of how she came to receive that payment, so that it was debt due which may be the subject of the repayment, which is

separate to proof of dishonest intent.

It  did  not  follow  from  the  appellant‟s  acquittal  that  she  had  received

payments to which she was entitled.

The  defences  of  issue  estoppel  or  the  principle  of  res  judicata  have  no

application.

[21]     I answer the question stated in the case:

Did the Authority err in law in holding that issue estoppel or the principle of res judicata did not prevent the Chief Executive from asserting that the appellant was not entitled to receive the Domestic Purposes Benefit during the relevant period and seek to recover an overpayment?

Answer:   No.

J W Gendall J

Solicitors:

Mangere Community Law Centre, Auckland for Appellant
(Counsel acting: N C King, Auckland)

Crown Law Office, Wellington for Respondent