Bridgford v Chief Executive of the Ministry of Social Development  NZCA 410
The Court of Appeal has upheld a High Court ruling that the asset “claw back” regime, which is employed when the Ministry assesses applications for a long term residential care subsidy, operates to limit combined gifts into trust made by spouses to $27,000 pa, not $54,000.
The facts are relatively straightforward. The claimant (since deceased) applied for the residential care subsidy on the basis that her personal assets were below the “threshold” of $180,000 (since increased to $213,297). Many years before, the claimant and her spouse established a trust into which they each gifted $27,000 per annum. Non-dutiable gifts of $27,000 per person were allowed at that time. In assessing the claimant’s application for the residential care subsidy, the Ministry clawed back half of those gifts, effectively requiring that they be expended in meeting costs of care before a subsidy was available. It argued that, for the purposes of the residential care subsidy, spouses could only have made combined gifts to trust of $27,000. The claimant challenged the Ministry’s decision in the High Court, which found in favour of the Ministry.
A discussion of the ability for the Ministry to claw back gifts is in the case note on the High Court decision.
The Court of Appeal’s reasoning for dismissing the appeal was largely the same as the decision given by the High Court. That is, although the $27,000 threshold was the same for both gift duty and the care subsidy threshold, it was intended to apply in different ways. The former applied to spouses individually but the latter applies to them jointly. The Court agreed that the “additional” $27,000 that the claimant and her spouse had gifted into trust over many years in order to reduce debt without gift duty, ought to be clawed back.
The decision is s fairly straightforward exercise in statutory interpretation except for the argument that was advanced that section 19 of the New Zealand Bill of Rights Act applies. This affirms the right not to be discriminated against and the argument was that by applying a $27,000 limit to couples they were discriminated against compared with single applicants to whom the same limit applied. The Court of Appeal dismissed the argument but in terms that suggest that if a couple has not organized their finances as a single unit it may be discriminatory to limit gifts into trust to $27,000 between them. This could be significant for couples such as those in second relationships who have maintained a degree of financial separation.
G D Clews, 2013