Northern Ireland - Social Security and Child Support Commissioners' Decisions

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[2002] NISSCSC C23/02-03 (21 January 2004)

Decision No: C23/02-03(IS)

SOCIAL SECURITY ADMINISTRATION (NORTHERN IRELAND) ACT 1992

SOCIAL SECURITY (NORTHERN IRELAND) ORDER 1998

INCOME SUPPORT

Appeal to a Social Security Commissioner

on a question of law from a Tribunal's decision

dated 29 October 2002

DECISION OF THE SOCIAL SECURITY COMMISSIONER

This is an appeal by the Department, with leave of the Legally Qualified Member (who was the sole member of the Tribunal) granted on 23 January 2003, against the decision of the Appeal Tribunal in which the Tribunal, in allowing the claimant's appeal, decided that the claimant was entitled to income support (IS) from 11 June 2002 as his capital did not exceed £8000.

I arranged a hearing of the appeal at which the claimant, who was not present, was represented by Mr McVeigh of the Northern Ireland Citizens Advice Bureau while the Department was represented by Mr Gough of the Decision Making and Appeals Unit.

The claimant and his wife owned land separated from their dwelling house, as joint tenants. On 18 January 1995 the joint tenancy was severed and the claimant and his wife became joint owners as tenants in common. The claimant's wife made a will in which she left her equitable interest in the land as well as half her interest in a dwelling (not her home) to her children until they reached 18 years of age. The will also stipulated that the trustees to the will had absolute discretion to sell, mortgage, lease or otherwise deal with the property and that if the property was sold, the monies received were to be distributed between her two children equally upon their reaching age 18. In the event that the property was not sold then the half interest in the house went to the daughter while the half interest in the land went to the son K. The claimant's wife died on 4 July 1995. The claimant had been in receipt of IS in lieu of incapacity benefit (IB) from 28 April 2001. It was then discovered that he had an interest in land separate from the home. The District Valuer considered that the property, as a whole, was worth £60,000 and that the claimant's interest in the land was worth £26,000, before any deductions, as at 15 November 2001. After deducting 10 per cent for expenses of sale (under regulation 49 of the Income Support (General) Regulations (Northern Ireland) 1987) the decision maker decided that the claimant's interest was worth £23,400. The claimant was disallowed IS on 12 April 2002 on the basis that he had capital exceeding £8,000. The claimant then made a new claim for IS on 11 June 2002. This claim was disallowed on the basis of the evidence that had already been obtained, on the grounds that the claimant had capital exceeding the prescribed amount of £8,000. The decision maker looked at the decision again but did not revise it. The claimant appealed the decision. The Tribunal decided that a nil value should be assigned to the claimant's interest in the property.

The Tribunal gave the following reasons for its decision: -

"Allowed.

On 11.6.02 [P] was co-tenant of land situated in T…. The other co-tenant was [K], who on date of claim of 11.6.02 was aged 17 years and 3 months.

By the terms of his late mother's will, [K] was to become tenant in common of the lands, his father being the other co-tenant.

However, until [K] was 18 years of age the lands in question are held by trustees – the executors of the will of [JP], in trust for [K]. These trustees are [GL] and [MM] (the deceased's son and brother).

Today Mr R told me he had consulted with his client [P], and the letter has confirmed that the trustees were refusing to allow the lands at T… to be sold until [K] becomes of age – on his 18^th birthday in March 2003.

In March 2003, when [K] becomes full co-tenant with his father, it will be entirely up to [K] as to whether or not he would be willing to sell the lands so that his father could realize his hold share of the value of the lands.

In the meantime, until March 2003, I find that as it would be impossible to sell these lands, that the value of the land for [P] with regard to sale is nil.

I appreciate that [P] may be receiving a small yearly income from leasing the land. It will be up to the Department to calculate this amount.

Appellant's capital for lands at T… must be considered as nil from 11.6.02, until co-tenant becomes eighteen years in March 2003."

According to Mr Conlon (who originally represented the Decision Making and Appeals Unit but who, due to illness, was not able to attend the hearing) the general position in Northern Ireland, as understood by the Department, was that regulation 52 of the Income Support (General) Regulations (Northern Ireland) 1987 applied in all cases where there was jointly owned property. This meant that each person with an interest in the property was deemed to have an equal share and that that deemed share was to be valued.

Regulation 52 is in the following terms: -

"Capital jointly held

52.-(1) Subject to paragraph (2), except where a claimant possesses capital which is disregarded under regulation 51(4) (notional capital), where a claimant and one or more persons are beneficially entitled in possession to any capital asset they shall be treated as if each of them were entitled in possession to the whole beneficial interest therein in an equal share and the foregoing provisions of this Chapter shall apply for the purposes of calculating the amount of capital which the claimant is treated as possessing as if it were actual capital which the claimant does possess.

(2) Any premises or land not wholly owned by the claimant shall be disregarded for such period as is reasonable in the circumstances to enable the collection of such information as is necessary to determine the treatment of capital in accordance with paragraph (1)."

However, the Court of Appeal in England in the Hourigan v Secretary of State for Work and Pensions 2002 EWCA Civ 1890 made it clear that regulation 52 operated to treat as severed the unity of interest in jointly owned property and then deemed the claimant and any other owners as having equal shares in the undivided interest. Moreover, where ownership is under a tenancy in common, there already is an undivided interest which is separately disposable and, therefore, there is no need to apply the deeming provisions in regulation 52 when assessment value of a tenancy in common. Accordingly the amount to be taken into account is the market value of the claimant's actual share of the undivided interest. Therefore the claimant's beneficial interest falls to be valued as a separate asset in accordance with regulations 46 and 49 of the Regulations.

Regulation 46 of the Income Support (General) Regulations (Northern Ireland) 1987 is in the following terms: -

"Regulation 46. (1) For the purposes of Part III of the Order as it applies to income support, the capital of a claimant to be taken into account shall, subject to paragraph (2), be the whole of his capital calculated in accordance with this Part and any income treated as capital under regulation 48 (income treated as capital).

(2) There shall be disregarded from the calculation of a claimant's capital under paragraph (1) any capital, where applicable, specified in Schedule 10 (capital to be disregarded)."

Regulation 49 is in the following terms: -

"Regulation 49. Capital which a claimant possesses in the United Kingdom shall be calculated –

(a) except in a case to which paragraph (b) applies, as its current market or surrender value, less -

(i) where there would be expenses attributable to sale, 10 per cent., and

(ii) the amount of any incumbrance secured on it;

(b) in the case of an Ulster or a National Savings Certificate -

(i) if purchased from an issue the sale of which ceased before 1^st July last preceding the first day on which income support is payable or the date of the determination of the claim, whichever is the earlier, or in the case of a supersession, the date of that supersession, at the price which it would have realised on that 1^st July had it been purchased on the last day of that issue.

(ii) In any other case, at its purchase price."

In granting leave to appeal the Legally Qualified Member stated as follows: -

"Co-tenancies. I accept [the claimant] has a beneficial interest in land as a co-tenant. Am I correct in saying that, if [the claimant's son's] trustees will not allow sale of the land until [the claimant's son] attains the age of majority (when it will be up to [him] and his sister to consider the matter of sale), [the claimant] does not have disposable asset, and although holding a beneficial interest, this interest can not be taken to have a monetary value until in theory it can be considered as a disposable asset."

It seems that the Legally Qualified Member has accepted that the Tribunal erred in law in light of the decision of the English Court of Appeal in Hourigan. However, the Department in its submissions has accepted that this error in law, whilst important in a legal sense, would not have made a difference to the outcome of the case since the effect of regulation 52, in the words of Brooke LJ, at paragraph 16, is: -

"… to treat that unity of interest as severed, and to treat the claimant as if he/she was entitled to an equal share (with the others) of the whole beneficial interest."

The Department, however, go on to submit that the Tribunal was wrong in its contention that the interest in equity held by the claimant has a nil value until his son reaches the age of 18. Relying on the decision of the majority of the English Court of Appeal in Wilkinson v Chief Adjudication Officer (R(IS) 1/01) and Great Britain Commissioner's decision R(JSA)1/02, it was submitted on behalf of the Department that all the facts surrounding the relevant property to be valued must be carefully considered when deciding whether a valuation is accurate. In the present case the claimant's wife, the testatrix, made it clear that the trustees could either sell the property or could retain it. If the property were to be sold, the capital money received from the sale would be held in trust for the claimant's son K – and this would still accord with the testatrix's wishes under the terms of her will. Therefore, even if the co-owners have stated that they would resist a sale, the Department submitted that, as there was no restriction in the terms of the will and that the property in question is not required as a home for a minor, there would be no reason for a court to refuse a sale.

In addition the Department argued that it was relevant that there would be no possible bar to a sale once K reached 18. The relevance of course is the date of the claim, namely 11 June 2002, but on that date a prospective buyer would only have to wait until March 2003 until K became 18. Accordingly, given the short time from the date of claim until K gained control over his share of the land, the value of the claimant's interest in the land could not be merely nominal.

Mr McVeigh accepted that it was not clear that the Tribunal dealt with the relevant issues. These issues included the questions whether -

(1) the other co-owners would have been willing to buy the claimant's interest in the relevant lands;

(2) a court would have liberty to order a sale or partition of the lands; and

(3) the fact that K was only nine months short of the age of majority (18) would have affected the market value of the claimant's interests in the lands.

Mr McVeigh also pointed out that this Tribunal, which did not have the assistance of having a presenting officer at the hearing, was misled by being informed at paragraph 8 of the Departmental submission that the Tribunal need only decide one question – namely – does the claimant have capital in excess of £8,000? In my view this kind of simplistic submission almost inevitably leads Tribunals into error.

Mr McVeigh in addition agreed with Mr Gough that the relevant amount that the Tribunal had to take into account was the claimant's actual share of the undivided interest.

I agree that the Tribunal erred in law by not considering those matters mentioned at paragraph 13 herein. It is clear that the Tribunal ought to have dealt with these issues in all the circumstances. As suggested by Mr McVeigh, it is important that any valuation takes into account all relevant factors, such as the condition of the land, access to the land, etc.

Mr Conlon made a specific and detailed submission in a letter dated 24 February 2003 which sets out the Departmental case in relation to valuation, which I consider appropriate to quote: -

"29. In Great Britain Commissioners decision R(JSA)1/02 the Commissioner held at paragraph 13:

"13. Proper valuation evidence should include details of the valuer's expertise, the basis on which he or she holds him or herself out as able to give expert evidence in relation to the property in question. Where it is the sale of a share in a property which is in issue, the evidence should deal with the valuer's experience in relation to such shares, and their sale. The property, and any leasehold interest, should be described in sufficient detail, including details of the length of any lease, of any special terms in it, and of the location, size and condition of the property, to show that the factors relevant to its value have been taken into account, and the reasons for the conclusion as to the value should be given. A similar approach should be applied to a share of a property, and an explanation should be given of the factors identified as relevant to the valuation, and how they affect it. The expert should also give evidence of any comparables identified, or of other reasons why it is concluded that the share could be sold at any particular price. If there is no evidence of actual sales of such interests, an acceptable explanation of the absence of such evidence should be given."

In this case the evidence from the valuer indicates that the deemed open market value of [the claimant's] share was £26,000.00. The form A64 ((TAB 13) in the Tribunal papers) shows that in considering the value to place on [the claimant's] beneficial interest the valuer assumed that [the claimant] was a willing seller and took into consideration the following:

(a) whether the other owners would agree to the sale of the asset as a whole

(b) whether the other owners would be willing and able to buy the share

(c) where the other owners would not buy the share or asset as a whole or are not prepared to vacate the property:

i. the attitude of the courts – whether they would order the sale of the property as a whole; as a partition; or some other order

ii. the length of time a purchaser may have to wait before obtaining possession of the asset, i.e. the share

iii. the potential legal costs of a buyer

iv. the rights of occupation of the other owners

v. planning or other restrictions on the property as specified on the form A64A (completed by [the claimant] (Tab 10) in the Tribunal papers)

vi. the risks that legal owners may try to abuse their position – for example, sell the property and keep the proceeds for themselves; encumber the property with secured debts; or lease the property,

vii. sales of similar share interests in property, the comparables used to value the share element being

VOA/VLA database

Sales information

Land registry list

Estate Agents' particulars

viii. Whether there is a market for the deemed share either at auctions or elsewhere

The A64 form used in Northern Ireland is similar to the one used in Great Britain. The Commissioner in decision R(JSA)1/02 was critical of the valuation carried out in that case. The Commissioner listed the various factors taken into account as I have done above and then stated at paragraph 4 of his decision:

"4. The valuer stated that she used the information on form A64A/LA1, took into account the above factors relevant to this case and used her professional judgment to reach a balanced valuation figure in valuing the undivided share at £9,200. She did not reflect the costs of disposal of the customer's interest in this valuation. She gave no reasons for her conclusions, nor did she state how she dealt with the various matters in paragraph 3(a) to (c) above."

Because the Tribunal decided that the refusal of the trustees to proceed with a sale meant that the value of [the claimant's] share was nil the Tribunal did not consider the merits of the valuation provided by the district valuer. I submit that this was an error of law and that the Tribunal should have had regard to the accuracy of the valuation.

If the valuation had been considered I submit that it falls short of the valuation practice outlined in Great Britain Commissioner's decision R(JSA)1/02. The valuer has stated that he took account of the various factors printed on the A64, but it can be seen that the factors at (a), (b) and (c) at paragraph 32 above are in the form of unanswered questions e.g. whether the other owners are willing to sell. The valuer has not stated the conclusion he reached on each of these matters, which I submit were central to the valuation. It may be that the valuation was carried out on the basis that the co-owners were unwilling sellers but this has not been made clear. Additionally, there is no evidence as to the valuer's expertise in valuing beneficial interests, nor is there evidence of comparables having been identified.

Whilst the details underpinning the valuation that one would expect the valuer to provide will vary depending upon the facts of a case I submit that where a beneficial interest is being valued there is a minimum amount of detail needed to be able to assess the accuracy of the valuation. If this case is to be remitted to a Tribunal then I submit that either the district valuer should be available to be questioned or that information is provided relating to:

. his expertise in this type of valuation,

. the basis on which the valuation was carried out in relation to points (a), (b) and (c) at paragraph 32,

. evidence of actual sales of comparable interests or an explanation of why these are not available."

In my view Mr Conlon is correct in his submissions. Any proper valuation requires a consideration of all those matters referred to and, in the circumstances, I doubt whether any Tribunal could come to a proper decision without taking into account those matters set out by Mr Deputy Commissioner Mark in Great Britain decision R(JSA)1/02, at paragraph 13 and, in addition, not only evidence of the valuer's expertise in relation to such valuation but also evidence of relevant comparators.

Both advocates drew my attention to an additional matter – namely, a possible discrepancy in relation to the total area of land in question. Whether this is or is not an error of law is not a matter that I intend to rule on, as it is somewhat academic in light of my findings on the main issues. However, suffice to say, the papers disclose that the relevant land is either about 20 acres or about 34 acres. Both figures cannot be correct. This issue will require resolution by the Tribunal rehearing this appeal and I would expect that the new Tribunal will require and be given clear and cogent evidence in relation to the land area involved.

For the reasons stated at paragraphs 16 and 18 herein, I hold that the Tribunal has erred in law. I therefore allow the appeal, set aside the Tribunal's decision and remit the case to be reheard by a differently constituted Tribunal which should take into account what I have set out in this decision in its decision making process.

J A H Martin QC

Chief Commissioner

21 January 2004