Northern Ireland - Social Security and Child Support Commissioners' Decisions

[2003] NISSCSC C10/03-04(IS) (18 October 2004)

 


Decision No: C10/03-04(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 21 February 2003 (arising out of a hearing held on 12 February 2003)

DECISION OF THE SOCIAL SECURITY COMMISSIONER

1. This is an appeal by the claimant, with the leave of a Commissioner, against the decision of the Tribunal, affirming the decision of the decision maker, to the effect that the claimant is not entitled to income support (IS) from and including 2 May 2002 as he has capital in excess of £12,000, being actual capital of £3484.34 and notional capital amounting to £54,000.
2. I arranged a hearing of the appeal at which the claimant, who was not present (although his son was 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.
3. The basic facts of the case are adequately set out in the Tribunal's statement of reasons for its decision. This statement is set out at paragraph 5 herein.
4. The relevant background law can be set out as follows. No person shall be entitled to IS if his capital exceeds a prescribed amount – section 130(1) and 132 of the Social Security Contributions and Benefits (Northern Ireland) Act 1992. Unless specific circumstances apply, the capital limit for IS is £8,000. As specific circumstances apply in the present case, as the claimant is over 60 years of age, the relevant capital limit is £12,000 – regulation 45(a) of the Income Support (General) Regulations (Northern Ireland) 1987. A claimant is treated as possessing any such capital that he has deprived himself of for the purpose of securing entitlement for increasing the amount of his IS, unless certain circumstances apply – regulation 51. Various disregards are set out in relation to the calculation of capital – regulation 46(2) and Schedule 10 of the Regulations.
5. The Tribunal, which consisted of a legally qualified member sitting alone, gave the following reasons for its decision (and which I have set out as corrected by the legal member): -

"The Tribunal makes the following findings.

The claimant claimed, and was awarded Income Support since 1992. Throughout his claim, he was a self-employed farmer, and owned farm land at Cabra, as shown in Document 7 of the appeal papers. The capital value of this asset was disregarded by virtue of the provisions of paragraph 6(1) of Schedule 10 of the Income Support (General) Regulations (Northern Ireland) 1987.

At a home visit, for the purposes of reviewing his claim, on 10.10.01 the claimant declared that he was still working part-time on his farm, and a form A2 was completed, taking into account farm accounts at £1.15 per week, as per an assessment dated 15.6.01, and capital of £3394.94. By letter dated 7.5.02 (received on 21.5.02) the claimant notified Newcastle Social Security Office that he was no longer carrying out part-time work on the farm and that he had transferred the farm to his son, Mr G… Junior. The actual date of transfer is not known but the transfer was completed by 26.5.02 (sic). The claimant's dwelling house and garden were excluded from the transfer and were retained by him.

The valuation and Lands Agency provided a valuation of the farm land in excess of £60,000, and this has not been disputed, and expressed the opinion that part of the Lands could be sold separately.

Mr G… Junior, worked part time on the farm (being employed full time as a Civil Servant) but did not receive any share of farm profits and was not in partnership with the claimant. He had his own sheep quota and helped out his father.

Mr G… Junior had provided the claimant with assistance in relation to making his benefit claims. The claimant received retirement pension and attendance allowance in addition to Income Support and his wife is also in receipt of Attendance Allowance.

In April 2002 the claimant was aged 82, was in poor physical health but was not suffering from any mental impairment.

The claimant had made a will, in which he devised the farm land to Mr G… Junior.

The Tribunal finds that the claimant had knowledge of the capital limit rules relating to entitlement to Income Support and that he deprived himself of capital, being his farm land, for the purpose of securing entitlement to Income Support.

Reasons

It is not in dispute that the claimant made a gift of his farm land to his son, nor that the value of the capital transferred exceeded £12,000. The issue before the Tribunal is whether the Department has discharged the burden of proving that his purpose was to secure entitlement to Income Support or increase the amount of that benefit.

The Tribunal rejects Mr Rice's submission that Regulation 51(1) of the Income Support (General) Regulations, cannot apply to the claimant as he was already in receipt of Income Support, before he transferred the farm.

His entitlement to Income Support depended on the disregarding of his farm land as a capital asset, and this in turn depended on his continuing to work on the farm. Once he ceased to do so, the capital asset could no longer be disregarded under Schedule 10 paragraph 6(1). Disposal of land could therefore "secure entitlement" within regulation 5(1).

It must be established that the claimant actually knew of the capital limit rule. The Department has not produced evidence of specific information given to the claimant in leaflets or otherwise. The claimant has denied any knowledge of the rules or that he was ever made aware of them, at home visits or elsewhere. Mr G… Junior's evidence is that he also was totally unaware of the capital rules, and could not therefore have made the claimant aware of them when he assisted him. Whilst the Tribunal can accept that neither may have had knowledge of the exact amounts of capital which a claimant may possess without affecting entitlement, it is not credible that they were unaware of the rule at all, nor that ownership of an asset worth in excess of £60,000 would not have some effect on entitlement. The claimant had been in receipt of Income Support for some 10 years, in addition to other social security benefits whilst receiving assistance from Mr G… Junior, has made his own claims, has been asked for verification of his savings, most recently at the visit on 10.10 01 when the Visiting Officer recorded some discussion of benefit rules, although there is no specific reference to capital rules. It is reasonable to conclude that the claimant has experience of the social security system.

He was in business as a farmer for many years, would have had experience of dealing with government departments in relation to applications for grants and quotas and it is reasonable to conclude that he would have needed to be familiar with rules and conditions of entitlement in such matters. Also, it seems unlikely that neither the claimant nor Mr G… Junior could really believe that a person who had savings of, say, £100,000 would qualify for Income Support.

With regard to the claimant's purpose in making the gift to his son, the Tribunal was presented with conflicting evidence. Mr Rice, in his written submission, stated that the claimant did so in return for care and attention received, and that the decision was based on legal and medical advice. At the hearing on 22.10.02 Mr G… Junior's evidence was that other members of the family provided personal care and that he understood his father's purpose was to reward him for helping out on the farm. As Mr G… had in fact left the land to his son in his will, this explanation of purpose would not explain why the land was transferred during the claimant's life.

In any event, the claimant's own evidence does not confirm this purpose. In his letter dated 7.5.02 he stated that he was "no longer able to run the farm," and in his direct evidence at the hearing on 12.2.03 he stated he was "not working it any more" and had "no use for it anymore". He denied that he had sought legal advice. The Tribunal prefers the claimant's evidence regarding the reason for transfer. Commissioners Decision CIS 242/93 referred to by Mr Rice is distinguishable on the facts (in that case the claimant's son was a joint owner of the asset and was given the proceeds of sale to assist in the purchase of his own home).

In R(SB)9/91 the importance is stressed of the question as to why the proceeds of sale of the asset in question would not be of use, even if the asset itself was no longer so. When asked what he had proposed to live on after giving away the land, the claimant said that he intended to live on his "pension" by which he apparently meant his retirement pension and Income Support. He stated that it was not traditional to sell the farm, he would not want strangers on the land and had never considered renting it out, or selling part of it. He must have been aware that by giving away the farm he also gave away its realisable value, which he must have realised was substantial. R(SB) 9/91 also stresses that it must be established that, whilst an intention to secure benefit need not be the predominant motive, it must constitute a "significant operative purpose". In that case, the claimant, who was not a rich lady, had given away her home. It having been established that she was compos mentis, had been in receipt of supplementary benefit for many years and must be regarded as being reasonably familiar with the system, that she would have realised that if she had the proceeds of sale she would not be eligible for benefit. The Commissioner stated that "to take any other view would fly in the face of common sense." One can understand why the claimant might choose not to sell his farm to strangers, but he could have considered one of the other options, or decided not to part with it at all.

Having taken account of all these circumstances I am satisfied, on the balance of probabilities, that a significant operative purpose of divesting himself of his farm was to secure entitlement to Income Support.

It is noted that the Department's decision dated 13.8.02 is not expressed to be a supersession decision, but it is clear that the decision was made following the suspension dated 29.5.02, and was grounded on a relevant change of circumstances. In effect it is a supersession decision and may be treated as such. No point regarding this was taken in the course of the appeal."

6. The grounds of appeal of the claimant were as follows: -

"1. The decision is supported by insufficient evidence.

The tribunal in this case consisted of a legally qualified member sitting alone. The legally qualified member held that on the balance of probabilities that Mr G…'s significant operative purpose of divesting himself of his farm was to secure entitlement to Income Support. This appears to be based, inter alia, on the following facts:

a. It was reasonable to assume that Mr G… has experience of the benefits system as he had been in receipt of Income Support for some years and had received a visit from a Visiting Officer.

b. He was in business as a farmer for many years and would have had experiences of dealing with government departments in relation to applications for grants and quotas and it is reasonable to conclude that he would have needed to be familiar with rules and conditions of entitlement in such matters.

c. It seems unlikely that neither Mr G… nor his son could really believe that a person who had "savings of, say, £100,000 would qualify for Income Support".

The above facts are based on assumptions. Neither Mr G… nor his son has been given an opportunity to comment or refute the above findings. The social security benefits system is extremely complicated for clients and professionals alike. It is unreasonable to assume that being in receipt of benefits for some time allows one to overcome the intricacies of the benefits system and in particular the rules surrounding deprivation of capital.

The tribunal has made an assumption that during the course of his business as a farmer, Mr G… would have had dealings with government departments in relation to grants and quotas. The tribunal found it reasonable to conclude that he would have needed to be familiar with rules and conditions in such matters. No evidence was obtained from Mr G… in respect of this. In any event it is unreasonable for the tribunal to compare like for like without examining both systems.

The tribunal found that it would be unlikely that neither Mr G… nor his son could really believe that a person who had "savings of, say £100,000 would qualify for Income Support". This finding is misleading as there is no evidence to suggest that Mr G… believed that the farm could be considered as "savings, of say, £100,000".

2. The decision is one which no reasonable tribunal could have come to.

As a matter of tradition, Mr G… passed the farm to his son to continue with the business. I would respectfully submit that it has not been proven that he did so in order to secure or increase entitlement to benefit nor has it been provided that Mr G… was aware of the capital limits."

7. Leave to appeal was refused by the legally qualified member on 11 June 2003 but leave was granted by a Commissioner on 23 February 2004 on the following grounds: -

"It is arguable that the decision was wrong in law, because it is arguable that the Tribunal erred in law in deciding that the claimant had deprived himself of a capital asset for the purpose of securing entitlement to Income Support – bearing in mind that it appears, if he had not deprived himself of the asset, that he would have remained on Income Support."

8. However, all legal issues were ventilated before me and these issues were not confined to the reasons given for granting leave to appeal.
9. In deciding the appeal I had the benefit of the claimant's original grounds of appeal, Mr Gough's written observations dated 29 October 2003 on the original application, his further written observations dated 16 March 2004, Mr McVeigh's written observations dated 16 April 2004, Mr McVeigh's skeleton argument dated 9 June 2004 and Mr Gough's skeleton argument received on 11 June 2004. In addition I had the benefit of the oral submissions of Mr McVeigh and Mr Gough.
10. Mr McVeigh's main contention was that the Department had failed to prove that Mr G… had deprived himself of a capital asset for the purposes of securing entitlement to IS and that the Tribunal had subsequently erred in law by reaching the same conclusion. In addition he submitted that the Tribunal erred in law by holding that Mr G… deprived himself of a capital asset for the purposes of securing entitlement to IS when in fact he was in receipt of IS before he transferred the land and would have remained in receipt of IS if he had not transferred it.
11. In relation to whether the lands formed part of the dwelling occupied as the home, Mr Gough submitted that the Tribunal did not err in law by not addressing this issue because the claimant did not raise the issue and the location of the relevant fields did not make the issue clearly apparent. Mr Gough also submitted that the Tribunal did not err in not addressing whether it was impracticable to sell the lands – again because it was neither raised as an issue nor was it clearly a matter of contention. However, Mr Gough did concede that the Tribunal erred by not considering whether it was unreasonable to sell the lands, as such an issue was raised, and by failing to address this point the Tribunal erred in law. Nevertheless Mr Gough also submitted that I, as a Commissioner, had all the necessary information before me to rule that it would not have been unreasonable for the claimant to sell the land. Accordingly he submitted that I, as a Commissioner, should exercise the powers set out in Article 15(8)(a) of the Social Security (Northern Ireland) Order 1998 to give the decision which I consider the Tribunal should have given. He submitted that in these circumstances I should take into account whether it was reasonable for the claimant to transfer the land to his son after he stopped working the land, due to age and ill-health, and thereby receive a means tested benefit, when he had had the means of supporting himself if he had sold the land. Even if he had retained the lands when he was no longer farming, Mr Gough submitted that the claimant would not have been entitled to IS.
12. I have to remind myself of the relevant issues in this case – the questions that the decision maker and the Tribunal on appeal had to decide were: -

(i) Did the claimant have actual capital in excess of £12,000 on 26 April 2002 – the date on which it seems to have been confirmed that the claimant had transferred the land to his son?

(ii) If he did have such actual capital, did he deprive himself of £54,000 of his capital for the purpose of securing entitlement to IS?

13. The Tribunal, as demonstrated in its very full reasoning, examined the legislation closely and dealt with the conflicting evidence and came to its decision on the facts clearly. Are these conclusions sustainable? The Tribunal found that on 26 April 2002 the claimant had actual capital of £3484.34 and notional capital of £54,000 - £60,000 reduced by ten per cent for expense of sale. The Tribunal also found that the notional capital figure was based on the fact that the claimant had deprived himself of £54,000 for the purpose of securing entitlement to IS.
14. The Department does not have to prove on the balance of probabilities that the land was transferred by the claimant to his son in order to obtain IS – only that, on the balance of probabilities, a significant operative purpose in divesting himself of his farm was to secure such entitlement – see Great Britain decision of Mr Commissioner Rice in R(SB)9/91. The Tribunal applied this test correctly. However this conclusion is based on the fact that the claimant would have had a notional capital of £54,000.
15. Nevertheless, it is always possible that a person in a similar position to that of the claimant but who has not transferred land, to continue to receive IS. Prior to such a transfer all the land would have been considered to be an asset of the farm business and accordingly under Schedule 10(6) of the Regulations, the land would have been discounted as a business asset. However, on retirement and on transfer of the land, an entirely different situation arises and the adjudicating authorities must consider the capital disregard set out at Schedule 10(1) which permits a dwelling house and certain relevant lands to be discounted. Would the claimant have been entitled to IS if he had not retired from farming but not transferred the land? In my view this is the crucial question in this case as, if he would have been entitled to IS in any event, the transfer could not be a deprivation intended to obtain IS. The Tribunal, in my view, was obliged to answer this question and, in the circumstances apply Schedule 10(1), which states: -

"The dwelling occupied as the home but … only one dwelling shall be disregarded under this paragraph."

Of course the application of Schedule 10(1) depends on the definition of a dwelling. This is set out in regulation 2 (in a form that is unique in the United Kingdom to Northern Ireland) in the following terms: -

""dwelling occupied as the home" means the dwelling including any garage, garden and outbuildings normally occupied by the claimant as his home, together with –

(a) any agricultural land adjoining that dwelling;

(b) any land not adjoining that dwelling which it is impracticable or unreasonable to sell separately; …"

16. It is clear from the findings of the Tribunal that the lands in the region of the claimant's dwelling were in two categories, namely, (i) those agricultural lands that were adjacent to the dwelling and (ii) other lands which were also agricultural and which were not so adjacent to the dwelling, as they were somewhat up a public road and on the other side of that road. This second portion of the lands was valued at £60,000 but was assessed to be worth £54,000 due to the 10 per cent allowance for the expense of sale. In relation to this latter portion of the lands, it is noteworthy that in its reasoning the Tribunal did consider the practicability of selling this land – the first limb of the definition of dwelling occupied as a home – but did not consider reasonableness – the second limb. In my view these are separate tests even though there may on occasions be a substantial overlap between impracticability and unreasonableness.
17. When considering reasonableness all relevant factors are capable of being taken into account, including the viability of farmlands if the lands further away from the home were separated in ownership from the lands adjoining the home.
18. Mr Gough has agreed that the issue of reasonableness was not taken into account by the Tribunal but has submitted in his written submissions that if it had been taken into account that the inevitable conclusion would have been that the result would have been a finding that it was reasonable to sell the lands – although at the hearing Mr Gough did concede that this submission was not perhaps entirely correct as the Tribunal, perhaps, ought to have considered the possible lack of viability of a small holding that had been divided in two.
19. If the claimant would have remained on IS even if he had not transferred the lands to his son, how could it be said that he transferred the land to obtain IS? I must say that I find this a difficult concept.
20. Certain questions seem to arise from the facts. What was the claimant's understanding? Did he think that he would have lost IS if he had retained the lands? Did he think that he might possibly lose IS if he retained the lands? Did he in such circumstances, because of an expected loss or a potential loss of benefit, rearrange his affairs to enable him to be sure of getting IS? If the latter question is answered in the affirmative it seems that he has not been particularly successful as the Department in this case stopped his IS.
21. I realise it is difficult to impute knowledge of this difficult area of law and, in particular, the relevant rights to benefit, when even persons who have considerable knowledge of social security law in general have difficulty ascertaining what the position is. Therefore one must first of all look at all the objective facts.
22. In these circumstances the decision maker and a Tribunal on appeal is required to come to a conclusion on the issue whether the claimant's action in transferring the land was an act of deprivation to obtain benefit or, at least, a significant operative purpose to secure such entitlement.
23. Before the decision maker or the Tribunal could be satisfied that the purpose of the transfer was to obtain benefit it ought to have considered and decided an earlier relevant issue, namely, whether IS would have been continued if the transfer had not taken place. This the Tribunal in the present case failed to do and accordingly I conclude that it erred in law.
24. Therefore the case must be remitted to a freshly constituted Tribunal to decide this issue. This Tribunal must decide whether, in light of the change of circumstances – namely, the retirement from the business of farming - the disregard set out in Schedule 10(1) (as clarified by the definition in regulation 2) is applicable. In so doing the Tribunal must consider both impracticability and unreasonableness.
25. If the Tribunal decides that it would have been impracticable or unreasonable to sell the second portion of land separately, the actions of the claimant in transferring the land could not amount to a deprivation by the claimant of £54,000 for the purpose of securing entitlement to IS, as he would have continued to receive IS in any event. Therefore the claimant cannot be disqualified from receiving IS by reason of having notional capital amounting to £54,000 as the capital would no longer be attributable to him on those grounds.
26. However, if the disregard (Schedule 10(1) and regulation 2) is not applicable, the Tribunal must do its best to decide the main issue in this and every other case of its type – namely – has the claimant transferred his land in circumstances where a significant operative purpose was to obtain the relevant benefit? This is always a difficult question for the adjudicating authorities but it must be remembered that the burden of proof is imposed on the Department to prove on the balance of probabilities that the claimant transferred the land in circumstances where a significant operative purpose was to obtain benefit. All the circumstances of the case should be investigated, including how the claimant intended to support himself after the transfer and where he was intending to live. In addition the Tribunal may have to consider whether the transfer was a complete transfer of the claimant's interest because it appears that the claimant may still, to some extent, be in the farming business, as he is the owner of 20 sheep which apparently still graze his former lands. The basis of this continued farming may have to be investigated as there is a possibility that the claimant has not actually retired from farming. However I make no attempt to limit the factors or circumstances that the Tribunal may wish to take into account when deciding why the land was transferred, as much will depend on the evidence available to the Tribunal. These are matters best left to the experienced fact-finding body set up to hear such cases – namely the Tribunal.
27. A minor point arises. The Tribunal has referred on its reasons to the land transfer being completed by "26.5.02". The papers before me include a letter dated from solicitors 26 April 2002 which suggests that the transfer took place at an earlier date. This may be a matter which the fresh Tribunal may wish to investigate further in light of the available evidence.
28. As stated earlier in this decision, I allow this appeal, set aside the Tribunal's decision and refer the matter back to a freshly constituted Tribunal to decide the case. This Tribunal should take account of what has been set out in this decision.

(Signed): J A H Martin

CHIEF CPMMISSIONER

18 October 2004