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Changed approach to New Zealand superannuation

24 March 2016 - By Peter McKenzie QC and Tony McGurk

Few social welfare matters reach the Supreme Court. In a recent judgment the Supreme Court has departed from a long line of established authority and provided a new approach to the meaning of “ordinarily resident in New Zealand” for social welfare purposes.

The phrase “ordinarily resident in New Zealand” governs the criteria for entitlement to welfare benefits in New Zealand – see s 74AA of the Social Security Act 1964.

The same phrase also governs entitlement to New Zealand Superannuation (NZS) – see s 8 of the New Zealand Superannuation and Retirement Income Act 2001.

Mrs Greenfield was a missionary and as such entitled to the exemption from s 8(b) and (c) for those engaged in missionary work provided by s 10 of the Act.

As Justice Collins stated in the High Court:

“Since 1964 Parliament has recognised that those who engage in missionary work, as well as those who undertake the activities in s 9 of the Act should not be disentitled to New Zealand superannuation by virtue of the fact that they spend long periods of time abroad undertaking laudable activities such as missionary work. Parliament clearly recognised that people such as Mrs Greenfield and her husband could spend considerable periods of their working lives out of New Zealand yet, but not lose their entitlement to New Zealand superannuation.” 1

Mrs Greenfield had been engaged in missionary work for 19 years. She operated from a base in Singapore and worked extensively in several South East Asian countries– Cambodia, Myanmar, Thailand, Indonesia and Laos, principally among young people and women, working in community transformation and with children at risk. Her work involved teaching, training and leadership development.

Mrs Greenfield returned to New Zealand at age 65 to lodge her application for NZS. She informed the ministry that she intended to return to Singapore to continue her missionary work in South East Asia.

Application rejected

Her application was rejected on the ground that she was not ordinarily resident in New Zealand on the date of her application.

An appeal to the Social Security Appeal Authority (SSAA) was unsuccessful. The SSAA required that to be ordinarily resident in New Zealand the applicant’s habitual place of residence must be in New Zealand and absences must be only temporary: “It is difficult to characterise an absence of 19 years as a temporary absence”.

Mrs Greenfield successfully appealed this decision to the High Court. Justice Collins placed weight on the finding by the SSAA that “the Authority is in no doubt that she intends to return to New Zealand when her missionary work comes to an end” and held that when regard is had to Wilson v Social Security Commission2 and the line of authority following from that case,3 “an applicant’s intention is relevant to whether his or her absence from New Zealand is temporary or permanent.

If Mrs Greenfield has an unequivocal intention to return to New Zealand at a future point of time, then that suggests her current absence is only temporary, which should be considered when assessing whether or not she is ordinarily resident in New Zealand at the time of her application.

The Ministry sought and was granted leave to appeal to the Court of Appeal. That Court allowed the appeal and restored the decision of the SSAA and held that Justice Collins had wrongly treated an applicant’s subjective intentions as being determinative.4 The Court of Appeal emphasised the importance of actual physical presence in New Zealand for significant periods of time for a person to be ordinarily resident here and agreed with the SSAA that an absence of 19 years could not be regarded as temporary.

The Court referred to the need to take a “practical approach” having regard to the growing cost of superannuation for the New Zealand taxpayer.5

Mrs Greenfield sought and was granted leave to appeal to the Supreme Court from this decision.

Supreme Court decision

The Supreme Court6 rejected the Court of Appeal’s approach in regarding the cost to the taxpayer of superannuation as being relevant,7 but upheld the decision of the SSAA.

The Supreme Court did not, however, adopt the view taken in the Court of Appeal that the concept of ordinary residence requires actual physical presence in New Zealand for significant periods of time.

The Supreme Court agreed with the Court of Appeal in rejecting the weight Justice Collins placed on the Wilson line of authority and gave little weight to the applicant’s clear intention to return to New Zealand on completion of the purpose for her absence.

While not overruling this line of cases, which the Court considered to be “broadly consistent” with the approach it adopted, the Court held that “these cases do not support the proposition that an applicant’s subjective intention as to future residence is necessarily determinative of ordinary residence, although such intention may of course be highly relevant.”

The Supreme Court also treated s 8 as standing alone from ss 9 and 10 and rejected Justice Collins’s view that when reading s 8 and its requirement for ordinary residence regard may be had to s 10 and the fact that in the case of a missionary having exemption under that section, the applicant may necessarily have spent a long period of time outside New Zealand for the purposes of missionary work and such absence may therefore be treated as being temporary.8

Somewhat inconsistently, the Supreme Court in paragraph [34] of its judgment was prepared to view absences for the purposes of s 9 differently from absences for the purpose of missionary work under s 10.

The Court considered that absences for s 9 purposes may be viewed as “temporary” but the necessarily longer and, perhaps, lifetime absences of a missionary under s 10 could not be viewed in that way. This means that the longer a missionary remains outside New Zealand the less likely they will be considered to be ordinarily resident in New Zealand on the day of their application. This does seem anomalous having regard to the beneficial purpose of s 10.

New residence test

The Supreme Court put forward a new test for determining ordinary residence in paragraphs [36] and [37] of its judgment.

The Court held that both “ordinary residence” and “residence” refer to the place which is home for the time being. A person may be regarded as resident in the place regarded as home for the time being and ordinarily resident in the place usually so regarded.

The inquiry as to where a person is ordinarily resident should be directed to where that person’s home has been up to that date and what their future intentions are. Where someone is living outside New Zealand, that person’s intentions as to future residence will be material. The stronger and less equivocal the intention to return the more likely it is that ordinary residence in New Zealand has been retained.

A critical element in the Supreme Court’s new test for ordinary residence is the length of time a person has been absent from New Zealand. The state of mind is, however, only one consideration and “must be assessed alongside the domestic realities of that person’s life” including the length of time that person has lived out of New Zealand. Other considerations referred to by the Court are the age of the person, and family connections with New Zealand and the other country.

This test may not be easy to apply in the individual case. It also risks being confused with the test for domicile which is also determined on the basis of the place that a person treats as being their permanent home.9

The Court took a broad approach in applying this test to an example that the Court itself put forward. A person who takes a temporary job in Australia for six months but whose family and house remain in New Zealand would, the Court considered, remain ordinarily resident in New Zealand, and this would be so even if the person entertained the possibility of remaining in Australia “depending on the way circumstances panned out”.10

Singapore her home

On the other hand, the Court when applying the test to Mrs Greenfield’s circumstances held that she was ordinarily resident in Singapore on the date of her application. Singapore was the place which was then her home (in the sense of being the location of “her everyday domestic life”). Since this had been the case for the preceding 19 years and she had no fixed plan as to when she would leave Singapore, the Court held that she was obviously ordinarily resident there too, “and this on any conceivable approach to the legal test”.

Having a home outside the country for as long as 19 years apparently presented an insuperable bar to qualifying for ordinary residence in New Zealand. This does appear a harsh outcome if the facts before the Court are taken into account.

On those facts Mrs Greenfield might have been expected to succeed. She was a person who was living outside New Zealand on the date of her application but had a clear intention to return to New Zealand and retire and make her home here on completion of her missionary service.

She had maintained close connections with New Zealand during her period of absence. She had elderly parents, children and grandchildren in New Zealand, she held a property in New Zealand on which she and her husband intended to build a home for their retirement on completion of their missionary work. She used a New Zealand doctor during her absence and endeavoured to return to New Zealand for at least three weeks in every year.

By comparison her links with Singapore were marginal and related only to matters essential to residing in another country such as renting accommodation and paying tax. Few missionaries who had lived outside the country for 19 years would have closer links to New Zealand. Where she had a choice this was exercised in favour of New Zealand – ie, she chose not to purchase a home in Singapore but to rent there and chose not to take up citizenship.

Put simply, Mrs Greenfield’s absence was for the sole purpose of engaging in missionary work and there was no doubt, as the SSAA, the High Court, Court of Appeal and Supreme expected, that she would be returning to New Zealand upon completion of that missionary work.

In every respect Mrs Greenfield’s connection with New Zealand remained strong throughout her time as a missionary. The one factor that seemed to displace the accepted intention to return to New Zealand was that at the time of applying for NZS there was “no clear return date” but importantly 19 years was simply too long an absence regardless of the circumstances.

From this, a new test has emerged from the Supreme Court’s judgment as to ordinary residence in the social welfare context, which is that an established intention to return can now be displaced by the length of the absence.

Whether this reflects a principled approach to determining ordinary residence may be a matter for debate, but the judgment suggests strongly that length of absence is itself capable of overriding other positive indicators of a person’s ongoing connection with New Zealand.

There is further irony in the fact that had Mrs Greenfield given up her missionary work at the time of applying for NZS she would have been ordinarily resident in New Zealand at the date of application therefore eligible to receive NZS.

The objective of the s 10 exemption for missionaries is to remove barriers that may prevent a person choosing to engage in missionary work, hence Parliament relaxing the residential requirements to ensure missionaries aren’t penalised upon returning to New Zealand by being refused NZS for failure to meet the residency test. For Mrs Greenfield, it was her decision to carry out further missionary work that meant she was not entitled to NZS.

Despite these factors, many missionaries can draw some comfort from the limited application of this decision. All the Courts involved did confirm that if Mrs Greenfield had decided to stay and retire in New Zealand at age 65, when making her application, and not return to carry out more missionary work, she would undoubtedly have been ordinarily resident in New Zealand on the date of her application and would have qualified for NZS.

Peter McKenzie QC and Tony McGurck are Wellington barristers who appeared for the applicant in this case.

1.  [2013] NZHC 3157 at para [51].
2. Wilson v Social Security Commission [1988] 7 NZAR 361at 364-366.
3. Clarkson v Chief Executive [2010] NZAR 657; Matenga v Director-General HC Wellington AP91/98, 16 June 1999, Doogue and Gendall JJ; Carmichael v Director-General [1994] 3 NZLR 477.
4. [2014] NZCA 611; [2015] 3 NZLR 177(Wild, White and French JJ).
5. The Court of Appeal referred to costs of 10.2 billion before tax in 2013 or between 4 and 5 % of GDP.
6. Greenfield v Chief Executive of the Ministry of Social Development [2015] NZSC 139.
7. The Supreme Court did not refer to but appears to have derived support for this stance from the judgment of McGechan J in Wahrlich v Bate [1990] 3 NZLR 97 which was cited to the Court.
8. High Court , supra n at paras [29],[30] and [51].
9. Domicile Act 1976 and Laws of New Zealand, Conflict of Laws, ,para 81...
10. Supreme Court paragraphs [36] and [37]. It should be observed that the person in this example, if not a missionary or a person under s9, would still have to satisfy the residential and presence requirements of s8(b) and (c).

Last updated on the 24th March 2016