Murphy v Chief Executive of the Ministry of Social Development
[2013] NZHC 3454
•18 December 2013
IN THE HIGH COURT OF NEW ZEALAND WELLINGTON REGISTRY
CIV-2013-485-2343 [2013] NZHC 3454
IN THE MATTER of an appeal by way of case stated from the determination of the Social Security Appeal Authority at Wellington under s
12Q of the Social Security Act 1964
BETWEEN LEANNE MURPHY AND NEIL REED Appellants
ANDTHE CHIEF EXECUTIVE OF THE MINISTRY OF SOCIAL DEVELOPMENT
Respondent
Hearing: 16 December 2013
Counsel: Appellants in Person
T Bronwich and R Garden for Respondent
Judgment: 18 December 2013
JUDGMENT OF GODDARD J
This judgment was delivered by me on 18 December 2013 at 12.00 pm, pursuant to r 11.5 of the High Court Rules.
Registrar/Deputy Registrar
Solicitors:
Crown Law Office, Wellington for Respondent
MURPHY v THE CHIEF EXECUTIVE OF THE MINISTRY OF SOCIAL DEVELOPMENT [2013] NZHC
3454 [18 December 2013]
[1] Ms Murphy and Mr Reed, the appellants, appeal by way of case stated from a decision of the Social Security Appeal Authority (the Authority) pursuant to s 12Q of the Social Security Act 1964.
[2] The appellants’ home in Bexley, Christchurch was seriously damaged in the September 2010 and the February 2011 earthquakes and was ultimately red-zoned. During the period 22 February to 11 June 2012, the appellants received temporary accommodation assistance. This was terminated on 11 June 2012 as they had “settled” their insurance claim on that date. However, as the appellants did not move into their replacement home until 19 February 2013, they are seeking an effective back payment of temporary accommodation assistance for the eight-month period following settlement of their claim pending completion of their new house.
[3] The Benefits Review Committee and the Authority upheld the respondent’s decision to terminate the appellants’ entitlement on settlement of their insurance claim.
[4] The appellants now appeal against the Authority’s decision on two narrow
and related questions of law stated as follows:
(i) Did the Authority err in law in determining that, for the purposes of Clause 11(da)(iia)(B) of the Temporary Accommodation Assistance (Canterbury Earthquake) Programme, the insurance claim for damages to the premises of Ms Murphy’s property was “settled” by
11 June 2012?
(ii) Did the Authority err in law in determining that it was not open to the Chief Executive to continue payment of Temporary Accommodation Assistance?
Background facts
[5] There is no dispute about the background facts as they unfolded.
[6] The appellants’ home in Bexley, which was owned by Ms Murphy, was rendered uninhabitable by the September 2010 earthquake. The appellants’ insurance covered them for the cost of temporary accommodation for a year following the February earthquake. In anticipation of that cover ceasing on
21 February 2012, the appellants applied for, and were granted, temporary
accommodation assistance under the Temporary Accommodation Assistance
(Canterbury Earthquake) programme (the programme) from 22 February 2012.
[7] The appellants’ mortgage on their home in Bexley and their home insurance were with Westpac New Zealand Limited (Westpac), underwritten by Lumley General Insurance (NZ) Limited (Lumley).
[8] In late June 2011, following the red-zoning of the appellants’ land, and cognisant that their insurance cover for temporary accommodation assistance would run out in February 2012, the appellants took steps to begin the rebuilding process by selecting the company to rebuild their home and locating a suitable section on which they made an offer.
[9] The appellants chose not to select a builder nominated by Lumley and have Lumley manage the rebuild. Had they done so, they would apparently have been entitled to an accommodation allowance during the period of the rebuild, presumably provided by Lumley as part of ongoing insurance cover. The specific details of this were not provided to the Court.
[10] On 7 September, the programme was amended to change the date on which temporary accommodation assistance for affected premises in the red-zone would end. I shall refer to this further when I outline the legislative scheme. The relevance is that the amendment occurred after the appellants had made their election to enter into a contract with Golden Homes, rather than electing to have Lumley manage their rebuild via a builder of Lumley’s choice.
[11] On 30 August 2011, the appellants received a letter of offer from the Christchurch Earthquake Recovery Authority (CERA) to purchase their property (land only) and accepted it.
[12] On 8 December 2011, the appellants completed the purchase of the new section and on 2 February 2012 signed the house plans and contract with Golden Homes.
[13] I have already referred to the fact that the appellants’ application to receive temporary accommodation assistance following the end of their period of private insurance covering this was granted from 22 February 2012.
[14] After settling with the Government in respect of the land content, Ms Murphy negotiated the settlement of the appellants’ insurance claim with Lumley, in order to fund building of their replacement home.
[15] On some date, said to be before 11 June 2012, Ms Murphy signed a release and discharge agreement with Lumley, the salient terms of which are set out below:
I, Leanne Joy Murphy wish to case settle my insurance claim. I acknowledge and agree:
To accept payment of the sum of NZ$280,774 inc GST ... being the amount to rebuild my dwelling, plus $2000 under the landscaping benefit, from Lumley General Insurance NZ Ltd in full and final settlement, release and discharge of all claims and demands of whatsoever kind and nature, that I may now have, or but for this release and discharge would have had, against Lumley General Insurance NZ Ltd in connection with the loss of or damage to my property and its fixtures and fittings as a result of the earthquake, my claim and my policy. ...
Lumley is entitled to pay the settlement amount to Westpac New Zealand Limited whose receipt for payment shall constitute a full release and discharge in terms of this agreement and of my rights and entitlements under the policy.
...
[16] The appellants were apparently refinancing with Westpac in order to build their new home. After settlement of the prior mortgage out of the insurance funds from Lumley, the residue of funds was held by Westpac in a construction account for payment out of progress claims to the builder as required.
[17] On 11 June 2012 Ms Murphy advised the respondent that she had settled with both the Government (for the land) and with her insurer. As a result, the respondent determined that the appellants were no longer eligible for temporary accommodation assistance pursuant to cl 11(da)(iia)(B) of the programme, which provides that
temporary accommodation assistance will end on the date on which an insurance
claim for damage to premises is “settled”.
Legislative scheme
[18] Following the September 2010 and February 2011 earthquakes, as noted, the Temporary Accommodation Assistance (Canterbury Earthquake) Programme was established pursuant to s 124(1)(d) of the Social Security Act 1964. This had originally been introduced as a paper presented to Parliament on 16 February 2011 (gazetted 3 March 2011). The instrument was subsequently amended a number of times. As also noted, the relevant amendment for the purposes of this case was that dated 7 September 2011 and gazetted on Thursday 15 September 2011.
[19] The operative clause for the purpose of this appeal is cl 11 entitled “Ending of assistance”, which provides in (da) that temporary accommodation assistance ends on the close of the earliest of the following dates:
...
(da) in the case of affected premises in the red zone in respect of which a
Government offer has been made, the earliest of the following dates: (i) the date on which that offer expires:
(ii) the date on which settlement of that offer occurs following its acceptance in respect of the whole of the affected premises:
(iia) the later of:
A the date on which settlement of that offer occurs following its acceptance in respect of the land only of the affected premises; and
B the date on which the insurance claim for damage to the premises is settled;
[20] Under cl 5 of the programme, “settled” and “settlement” are defined as:
(a) in relation to an insurance claim, means payment in full and final settlement of all claims for damage to the premises from the earthquake is received by the claimant or claimants;
(b) in relation to a Government offer that has been accepted, means payment in full and final settlement of the purchase price is received by the person or persons to whom the offer was made.
[21] The issue on appeal is whether the appellants’ claim for damage to their premises has been “settled” for the purposes of cl 11(da)(iia), and turns on whether payment of their insurance claim for damage to their Bexley house has been received by them in “full and final settlement”.
Authority’s decision
[22] The Authority found that Westpac, in receiving the settlement sum, was acting as the appellants’ mortgagee rather than as their insurer and thus was entitled to receive the funds as mortgagee of the Bexley property and refinancer of the new house being built. As the settlement sum paid to Westpac was a consequence of the appellants’ financing arrangements with the bank, it could not be contended that the funds had not been received by the appellants. On that basis, the Authority was satisfied that the appellants’ claim had been settled on 11 June 2012; and that they were not entitled to continue to receive payment of any temporary accommodation assistance.
[23] The Authority recognised that its decision distinguished between those who chose to manage the building of their new home and those who allowed their insurance company to manage the build, and commented that this seemed unfair. The Authority observed that the appellants could, however, take this up with Parliament’s Regulations Review Committee.
Jurisdiction on appeal
[24] The appellants’ right to appeal to the High Court, provided by s 12Q Social Security Act 1964, is confined to questions of law. The Authority’s decision can only be overturned if it made an error of law as to the legal principles applied or reached a finding of fact that was not reasonably open to it.1
[25] As to when a factual determination will amount to an error of law, the
Supreme Court has stated:2
1 Edwards v Bairstow 1956 AC 14 (HL) at 14.
2 Bryson v Three Foot Six Ltd [2005] NZSC 34 at [24]-[26].
An ultimate conclusion of a fact-finding body can sometimes be so insupportable – so clearly untenable – as to amount to an error of law ... That will be the position only in the rare care in which there has been ... a state of affairs “in which there is no evidence to support the determination” or “one in which the evidence is inconsistent with and contradictory of the determination” or “one in which the true and only reasonably conclusion contradicts the determination”.
Question one: Did the Authority err in law in determining that, for the purposes of Clause 11(da)(iia)(B) of the Temporary Accommodation Assistance (Canterbury Earthquake) Programme, the insurance claim for damages to the premises of Ms Murphy’s property was “settled” by 11 June 2012?
[26] It is agreed that, under cl 11, temporary accommodation assistance for the appellants ended on “the date on which the insurance claim for damage to the premises [was] settled”.
[27] The issue is whether, in signing the release and discharge agreement on
11 June 2012, the appellants had “settled” their insurance claim; that is, in terms of cl 2, whether they had received a payment in full and final settlement of all claims for damage to the Bexley premises from the earthquake.
The respondent’s position
[28] For the respondent, Ms Bromwich argued that whether payment had been received should be interpreted according to the ordinary principles of contractual interpretation; it being an established principle of contract that payment of a debt to a third party, if requested, will equate to payment to the creditor, and suffice to discharge the debt. On the basis of that principle, Ms Bromwich suggested the appellants received the payment when it was received by Westpac, as authorised third party.
[29] Ms Bromwich did not rely on the Authority’s finding that Westpac received the funds as mortgagee, to be held on behalf of and for the credit of the appellants. Instead, she characterised the arrangement as Westpac using the settlement money for the benefit of the appellants’ rebuild, in a designated “construction account”. She contended it was not necessary for Westpac to have received the money as mortgagee for the credit of the appellants, as any authorisation by Ms Murphy to pay
the settlement money to Westpac was sufficient to constitute payment to the appellants.
[30] Ms Bromwich further submitted that the policy choices in the September
2011 amendment deliberately distinguished between owners of properties within and outside the red-zone. For properties outside the red-zone, the date at which an entitlement for temporary accommodation assistance ends is specified as the date on which the affected premises are available for re-occupation as a home following the completion of remedial work on those premises. In contrast, that date was deliberately not chosen as the end point of entitlement for owners within the red-zone. By providing for “settlement” as the end date for red-zone owners, the Government clearly decided to determine the end point of entitlement for temporary accommodation assistance with settlement of all claims for the affected premises.
[31] Ms Bromwich further submitted that receipt of payment must include receipt by a third party, otherwise there could be no end date in a situation where payment not made directly to the appellants would, on their interpretation, never be received and settlement would never occur. This must be contrary to the programme which is for temporary assistance only, and for a finite period of time.
The appellants’ position
[32] The appellants pointed to the broader policy of the temporary accommodation assistance, which is to support people who own homes in the residential red-zone who are faced with dual accommodation costs. They emphasised that for the period in which they were claiming temporary accommodation assistance, they were faced with both rental costs and mortgage repayments: the situation that the temporary accommodation assistance was designed to alleviate. They submitted that they had no choice but to sign the release and discharge agreement, in order to get approval for their mortgage to build the replacement home. They signed the release document without legal advice and without knowing it would affect their entitlement to temporary accommodation assistance. They pointed out that the concept of insurance is to allow reinstatement
of an insured’s position and, as they were not reinstated into a new home until
February 2013, their claim did not effectively settle until then.
[33] In terms of a definition of “settled” or “settlement”, they argued for a definition of “settled” to mean settled in their replacement home; and alternatively for a definition of “settlement” to mean reaching an agreement with the Government about receipt of a temporary accommodation allowance until a certain date, namely the date of occupation of their replacement home.
Analysis
[34] This question can be analysed in two parts:
(a) Whether entitlement for red-zone owners ends when a new home is available for occupation, in other words when dual accommodation costs cease?
(b) Did settlement occur in this case on 11 June 2012?
[35] The explanatory note to cl 11(da) of the temporary accommodation assistance programme, which was inserted in September 2011, says that:
This instrument ... amends the Temporary Accommodation Assistance (Canterbury Earthquake) Programme so that temporary accommodation assistance no longer ends on the date on which the deposit is paid following acceptance of a Government offer for affected premises in the red zone. Instead, it ends on settlement of the offer, if accepted in respect of the whole of the affected premises, or on the later of the settlements of the offer and insurance claim, if the offer was accepted in respect of the land only, provided these events occur before the Government offer or the programme expires.
[36] Clause 8 of the programme is also instructive, as it determines eligibility for the temporary accommodation assistance. In summary, the requirements for
eligibility for someone whose premises are in the red-zone are that:
agovernment offer has been made, or are eligible for a government offer to be made; and
the person is incurring costs for temporary accommodation for the period that he or she has been required to vacate the affected premises; and
the person’s insurance cover for temporary accommodation has expired; and
the person intends to occupy replacement premises in the Canterbury region as soon as practicable after settlement of a Government offer or an insurance
claim, or both; and
the person has not received settlement following acceptance of a Government offer in respect of the whole premises, or received settlement of an insurance
claim for damage to the premises.
[37] Clauses 8 and 10 make it clear that the provision of temporary accommodation assistance is limited to the period between an applicant’s home becoming uninhabitable (due to its classification in the red-zone) and the date when the applicant receives settlement of a Government offer, or settlement of an insurance claim for damage to the premises. The programme is silent on temporary accommodation needs after a claim settles, and before replacement accommodation is secured. The programme presumes that an applicant will shortly stop incurring the cost of temporary accommodation at the point settlement is reached, because they will be in funds and intend (as reflected in cl 8(2)(a)(ii)(A)) to occupy replacement premises “as soon as practicable after settlement of a Government offer or an insurance claim”.
[38] In making this distinction between settlement date (for red-zone premises) and date of reoccupation of premises that have undergone remedial work (in the case of non-red-zone premises), the Government clearly recognised the different situation of red-zone owners whose property claims have been settled and whose goal is not remediation and eventual reoccupation, but rather relocation outside the red-zone.
[39] In drawing such a distinction, Government must have recognised that a settlement date might well occur before relocation to a new home could be implemented. That is because private insurance policies vary in terms of the options
they provide for settlement. As reflected in the appellants’ insurance policy, an insured may have the option of electing replacement of destroyed premises by the insurer, or a cash settlement at replacement value, to be applied by the insured as they see fit. In cases where an insured is covered for indemnity only and not for replacement value, a cash settlement may well be the option, which the insured may or may not be required to apply to the cost of repairs.
[40] The wording of the programme reflects a deliberate policy choice not to provide accommodation assistance to those who have reached full and final settlement with the Government and/or their insurers, but may still be in temporary accommodation while building or purchasing new premises. Given that such a deliberate policy choice was made, those in the appellants’ situation were clearly not intended to also be eligible for temporary assistance.
[41] Therefore, despite the purpose of the policy being to assist those facing dual accommodation costs, the programme cannot be expansively interpreted as providing assistance for red-zone owners up until the point of their occupation of a new home. For the reasons discussed, entitlement ends at settlement date, which on a practical level may in many cases be before occupation is possible.
[42] The next issue is whether settlement, as defined in cl 5 of the policy, has actually occurred in this case. Settlement is defined as occurring when payment has been received by a claimant or claimants. Contrary to the respondent’s submissions, I do not think the principles of contractual interpretation provide the appropriate starting point for the meaning of “received”. As the temporary accommodation assistance is a statutory instrument (although subordinate to the Social Security Act
1964), it should be interpreted through general principles of statutory interpretation.
[43] The natural and ordinary meaning of “receiving” a payment tends to suggest the transfer of value or funds from an insurer to the insured. In the context of insurance, the act of indemnification for loss or damage takes place when the value of that loss is restored, in monetary terms, to the insured. In this case, the appellants claim they have received no payment, and that settlement has not occurred.
[44] Although the appellants have not received payment, it has been received into a Westpac account in their name and on their behalf in satisfaction of their prior mortgage and to be applied for their benefit in constructing a new house. In this sense Westpac can be seen as the authorised agent or a trustee of the appellants, receiving payment and applying it for the purposes of enabling refinancing and construction of their new home. A condition of the mortgage was the appellants’ agreement to allow Westpac to receive the insurance payment from Lumley on their behalf. In this sense there is no material difference between the payment being made directly to the appellants and applied to the construction of their new property, and Westpac taking those steps on their behalf. The transfer of value is complete once those funds have been exhausted in paying for the construction of the new house in the appellants’ names. In any case payment has been received in a way that indemnifies the appellants for the damage sustained in the earthquakes, and in insurance law terms, this payment is sufficient to settle a claim.
Question two: Did the Authority err in law in determining that it was not open to the Chief Executive to continue payment of Temporary Accommodation Assistance?
[45] Ms Bromwich submitted that it was not open for the respondent to continue payment of the temporary accommodation assistance to the appellants, once that entitlement ended under cl 11. She said the policy does not allow a discretion for the respondent to continue payment after entitlement ends under cl 11. Payment not expressly authorised by the policy would also be contrary to the empowering statute, s 124 of the Social Security Act, which provides:
Any money that may be appropriated by Parliament for the purpose of granting special assistance under any welfare programme established and approved by the [Minister] under the authority of, and for the purposes of, this paragraph.
[46] Ms Bromwich further submitted that where money is appropriated for such a programme, it can only be used as authorised by the programme and there is no general discretion to use money outside the terms of that programme. I accept her submission in this regard, as the programme is case in mandatory terms, with no discretion provided for use of the funds appropriated outside the confines of the programme.
Result
[47] The appeal is dismissed.
Costs
[48] There will be no order as to costs.
Goddard J
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