Northern Ireland - Social Security and Child Support Commissioners' Decisions

[2009] NISSCSC C7_08_09(IS) (03 March 2009)

Decision No: C7/08-09(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 23 November 2006
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 was not entitled to income support (IS) from 23 December 2005 on the grounds that she is to be treated as having notional capital of £36,858.94 as she has deprived herself of this sum for the purpose of securing entitlement to IS.
2. The claimant was represented by John Ross & Son, Solicitors. A hearing of the appeal was arranged for 25 November 2008. However, by letter dated 20 November 2008 the solicitors stated that the claimant had instructed the firm that she did not wish to be represented at the appeal and that also she would not be attending in person. Prior to this indication the solicitors had taken an active part in the case and, in particular, had submitted relevant skeleton arguments. The hearing proceeded in the claimant's absence on 25 November 2008. At this hearing Mr Neil Crilly of Decision Making Services represented the Department.
3. The relevant factual background in relation to this case can be set out as follows. The claimant is currently living at an address in N….. . She claimed IS from 23 December 2005, having moved into her present address on 12 December 2005. She stated, in particular that she had income of disability living allowance (DLA) and savings of £2.00. She also was claiming incapacity benefit credits. She had had a previous claim to IS which was suspended, following a review visit by an officer of the Department on 17 February 2004. She had then stated that she had been living in her daughter's house following the sale of her own home in June 2003. She stated that she had received approximately £40,000 for that home. She supplied a copy completion statement from her solicitors which stated that the sum due to her on completion of the sale was actually £56,534.92. On 16 March 2004 she made a statement to the effect that she had given her daughter the proceeds from the sale of her property, that she knew the capital limits and that she thought she could live with her daughter and receive benefit to live on. The decision-maker decided on 2 November 2004 that the claimant had actual capital exceeding £8,000 (the relevant capital limit) from 20 May 2003. This decision resulted in a recoverable overpayment being raised against the claimant. Neither of these decisions were appealed by the claimant.
4. When she made the fresh claim for IS from 23 December 2005, the claimant supplied a copy of her bank statement showing a balance of £1.50 in an ISA account and £4.83 in a current account. The decision-maker then wrote to the claimant requesting further information about the proceeds from the sale of her house. The claimant replied to this enquiry by stating that she thought she would live in her daughter's house rent free as her daughter had moved out. However, her daughter and family then moved back into the house and she had decided to move out because of overcrowding. She also stated that she was attempting, through her solicitor, to recoup the money from her daughter.
5. The decision-maker decided that the claimant was not entitled to IS from 23 December 2005 as she had deprived herself of capital in order to claim IS. Therefore she was treated as having notional capital of £36,858.94 (allowing for diminishing notional capital from 20 May 2003 to 23 December 2005 amounting to £19,675.98). The claimant then appealed this decision. The decision was reconsidered but a "no change" decision was issued on 19 May 2006.
6. The appeal came before the tribunal on 11 September 2006. No presenting officer was in attendance. Ms Simpson of the Citizens Advice Bureau represented the claimant. However, the case was adjourned to investigate what advice the claimant actually had from IS section on capital limits from the beginning of her claim and the presenting officer was directed to attend and bring all relevant records pertaining to the award of IS and, in particular, the advice given regarding capital limits.
7. The tribunal reconvened on 23 November 2006, a presenting officer was in attendance at this hearing and the claimant was again represented by Ms Simpson. The tribunal disallowed the appeal and gave the following reasons for its decision:

"It is clear from all the evidence available that [the claimant] was aware of capital limits. It is clear upon receipt of the addendum that [the claimant] was involved in an almost identical scenario in 1999 when her benefit was lost due to her having excess capital following the sale of a house – her matrimonial home. Her statement […] indicates that she was aware of capital limits when she was interviewed on 16 March 2004. Given her previous involvement in benefit queries over the proceeds of a sale of a house it is hard not to draw the conclusion that on this occasion capital was not disclosed as [the claimant] would have knowledge of what exactly would have had happened to her benefit if disclosure was made.

There is no evidence of [the claimant] actually having been looking for properties at the time of the sale of the house in C….. V….., C….. or for her looking for alternative properly while residing in her daughter's property. There is no evidence of her contacting her local benefit office to make enquiries of any sort as regards capital.

I am satisfied on the balance of probabilities that notwithstanding she felt she would be living rent free in return for "leaving" the capital to her daughter, that [the claimant] would have been aware of the effect the capital sum would have had on her benefit entitlement and she wilfully deprived herself of benefit for the purposes of securing her entitlement to Income Support."

8. The claimant, now represented by John Ross & Son, Solicitors, sought leave to appeal to a Commissioner. Leave to appeal was refused on 25 April 2007. However, leave to appeal was then sought from the Commissioner and such leave was granted on 18 September 2008 for the following reasons:

"It is arguable that the decision was wrong in law, because the tribunal failed to make findings as to whether the claimant possessed capital in the form of a chose in action resulting from her initiating High Court proceedings.

Further, if such a chose in action did exist, it is arguable that the tribunal ought to have assessed its capital value."

9. Initially the claimant's solicitor and the Department focused their attention on whether the tribunal was correct in determining that the claimant was aware of the effect the capital sum would have had on her benefit entitlement and whether she had deprived herself for the purposes of securing her entitlement to IS. The Department in its submissions supported the tribunal's decision.
10. In the claimant's solicitor's written submissions the following points were made:

The claimant instructed the solicitors to bring High Court proceedings against her daughter and son-in-law to recover £56,504.92 which represented the sale of the appellant's former home at C….. This High Court action was commenced by a Writ of Summons on 6 June 2006 ie after the decision-maker's decision but before the appeal to the tribunal which was heard on 23 November 2006. The grounding affidavit in relation to this action was disclosed to the tribunal. In the main, it set out the claimant's understanding of an oral agreement which existed between her and her daughter and the subsequent difficulties which arose. The action was settled in the High Court on 8 November 2007 (ie after the tribunal appeal hearing) before Girvan LJ and the claimant's daughter and son-in-law agreed to repay the claimant £48,000 at the rate of £400 per month by way of standing order directly to her bank account. Apparently, to date these monthly payments have been received on the relevant due dates. These circumstances had arisen because the claimant had instructed her then solicitors to pay proceeds of the sale of her house, namely £56,504.92 to her daughter in May 2003 on condition that, inter alia, she, the claimant, would live alone and rent free at an address at C….. until such time as her daughter and son-in-law sold the property and refunded the claimant's capital. In the interim the daughter and son-in-law and their family were to reside at a larger property which they had privately rented. At the time of this arrangement the claimant was in receipt of IS. However, following a review of her entitlement, a decision was taken on 2 November 2004 that the claimant had capital in excess of the prescribed limit (£8,000). Accordingly her entitlement to IS ceased and she was deemed to have received an overpayment of £3,040.05, which she subsequently agreed to repay by deductions of £8.00 per week from her DLA. However, her daughter and son-in-law were unable to afford the rent for their home and therefore they moved back into the address in C….. . Relationships became strained and the appellant felt she had to seek alternative accommodation. Subsequently she moved on or about 19 December 2005 to a Northern Ireland Housing Executive house in N….. . On 23 December 2005 she made a renewed application for IS and other relevant benefits including housing benefit.

11. The claimant's basic case is that she did not deprive herself in May 2003 in order to claim benefits in December 2005. Even if it is held that she did so, it is also submitted that this was not her significant operative purpose.
12. In addition it was submitted on the claimant's behalf that if the appellant had at the relevant time a "chose in action", (ie a property right in something intangible or which is not in one's possession, but enforceable through legal or court action) that this constituted actual, as distinct from notional, capital in the hands of the appellant.
13. The question whether this was a notional or actual capital case was initially raised by the legal officer to the Commissioners in correspondence with the parties. In particular the legal officer raised issue whether, after considering decision R(IS)17/98, a decision of a Great Britain Commissioner, the tribunal considered adequately, or at all, whether the claimant had capital in the form of a chose in action rather than notional capital.
14. It is clear from the tribunal's decision that this issue was not dealt with at all.
15. The interest that the claimant had in the house in C….. turned out to have a particular value, as an exact figure was settled in November 2007. The Department, on reconsideration of the issue that was drawn to its attention by the legal officer, has brought paragraph 9 of R(IS)17/98, a decision of a Great Britain Commissioner, Mr Commissioner Rice, to my attention, where, in dealing with a case where there was a similar complicated interfamilial loan in issue, it is stated as follows:

"9. The new tribunal will have to determine who it was that actually incurred the indebtedness. The mere fact that the loan was taken out in the name, or former name, of the attorney is in no sense decisive. All the circumstances have to be looked at, including, in particular, the fact that both the attorney and the claimant, and the claimant's husband whilst he was alive, all derived the benefit of the expenditure. If the new tribunal consider that the real responsibility was that of the attorney, I do not see how she could have properly applied the claimant's capital for the purposes of paying off her own debt. This would be a clear breach of her fiduciary duty as attorney, and the claimant would have a chose in action for recovery of the money so misapplied. That chose in action would have to be valued, and that value would have to take into account the extent, if any, to which the attorney was unable to make restitution, and any costs that might prove irrecoverable. The chose in action so valued would constitute actual (as distinct from notional) capital in the hands of the claimant, and as such would, of course, have to be taken to account in determining whether or not the claimant had resources from all quarters in excess of the statutory maximum of £8,000."

16. Of course the tribunal did not have the High Court judgment of 8 November 2007 before it, as the tribunal case was being decided on 23 November 2006. However, it did have a copy of the claimant's affidavit which had been filed with the High Court in respect of that action. Having regard to this affidavit, the Department now submits, and in my view correctly, that the tribunal erred in law by not making findings on whether the claimant had a chose in action and, if so, what was its capital value. This value, by its very nature is an estimate of actual capital. Just because it is inherently difficult to value does not result in it becoming notional capital.
17. How ought a decision-maker or a tribunal on appeal deal with issues of capital relevant to benefit entitlement? While I do not wish to be too prescriptive, I suggest that a decision-maker or a tribunal on appeal in such circumstances should endeavour to seek the answers to certain questions, in a relevant and coherent order, and, if this is done, it is more likely that the correct decision will emerge. These are, in my view, the relevant questions:

(Questions (i) to (viii) relate to actual capital.)

(i) Is capital relevant to the rules of entitlement to the benefit at issue?

(ii) If so, what is the relevance of capital to the issues in the case eg if the capital is above a certain amount will the claimant's potential benefit be affected?

(iii) Is the capital at issue in the case actual capital? and, if so, identify the actual capital.

(iv) What is the connection between the capital and the claimant eg sole owner or co-owner?

(v) If there is such a connection, does anyone else have a legal or other interest in the capital?

(vi) Can any or all of the capital be disregarded, under the disregard rules?

(vii) If not, what is the value of the actual capital?

(viii) Having established the value of the actual capital, taking into account the disregard rules, is entitlement to the benefit at issue affected?

(Questions (ix) to (xiv) will help clarify whether one is dealing with actual or notional capital and care should be taken not to ignore these questions on an assumption, often a wrong assumption, that the relevant capital is notional.)

(ix) Did the claimant ever have capital which might have affected entitlement to the benefit in question?

(x) Has it been established that the claimant still has that capital? ie is it still actual capital?

(xi) What is the connection between that capital and the claimant eg sole owner or co-owner?

(xii) If there is such a connection, does anyone else have a legal or other interest in that capital?

(xiii) Can any or all of that capital be disregarded, under the disregard rules?

(xiv) If not, what is that capital's value?

(Questions (xv) to (xvi) relate to notional capital.

(xv) If no-one else has a legal or other interest in it, has the claimant deprived himself of the capital for the purpose of securing entitlement to benefit in line with the rules on deprivation? ie has it become notional capital?

(xvi) What is the value of the notional capital, taking into account the diminishing notional capital rule? ie has the value diminished over the passage of time?

The answers to these questions are not necessarily straightforward and almost inevitably, rigorous and careful fact-finding will be required by decision-makers and tribunals.

18. It seems to me that the tribunal's main error was in being persuaded by the Department, through the appeal submission, that it should be answering question (xv), rather than answering the questions to ascertain whether the capital was actual or notional, without giving any consideration to the previous questions. Although it could be said that the tribunal had been misled by the Department, the tribunal ought to have still asked itself the questions or similar questions to those that I have set out in the previous paragraph.
19. There is no doubt that this is a difficult area of law for tribunals to deal with. Clearly, as noted at paragraph 2.336 of Volume II of Social Security Legislation 2008/2009 at page 408, there is "a remarkable range of interests in property which do have a present market value and so are actual capital resources". A chose in action is one such interest and, even though often difficult to value, it does have an actual value rather than a notional one.
20. As the tribunal erred in law by dealing with this case as one of notional capital I must find that it has erred in law. Accordingly I allow the appeal, I set aside the tribunal's decision and remit the case to a new tribunal for re-determination. I direct that tribunal to deal with the issue of actual capital.
21. One issue will arise when the new appeal tribunal is required to value the actual capital asset, namely the chose in action, if it determines that this was actual capital which the claimant possessed at the date of the claim. Can the tribunal take account of the High Court proceedings which came into existence after the decision-maker's decision but before the appeal tribunal hearing? The problem arises as, under the provisions of Article 13(8)(b) of the Social Security (Northern Ireland) Order 1998, a tribunal "shall not take into account any circumstances not obtaining at the time when the decision appealed against was made." The decision in the present case was made on 14 February 2006. As stated earlier, the High Court proceedings post-date the decision. Is the tribunal required to ignore these proceedings? I take the view that there is guidance from Mr Commissioner Jacobs in CJSA/2375/00, a decision of a Great Britain Commissioner, at paragraph 31, where he stated:

"… an appeal tribunal is entitled to take account of any factor known to it that relates to a past period or past event that was relevant to the decision under appeal, even if the position at the date of the hearing is different from that at the date of the decision. This gives section 12(8)(b) (the equivalent Great Britain provision to Article 13(8)(b)) a sensible operation. It allows an appeal tribunal to substitute a decision on factors relevant to the period the Secretary of State (the equivalent to the Northern Ireland Department) had considered. But it prevents the tribunal from trespassing into the period after that date by taking account of factors that are only relevant to that later period."

22. In my view the tribunal is entitled to look at evidence in this case which clarifies matters that were relevant at the time the decision-maker made the original decision. However, unless there is clear evidence suggesting that High Court proceedings were imminent, the subsequent litigation ending in the High Court settlement of 8 November 2007 seems to have limited value in this case. The situation would have been very different if the litigation was commenced before the decision-maker's decision. This tribunal should certainly not blindly follow the monetary figure fixed in the settlement before the High Court dated 8 November 2007; the responsibility of the tribunal is to value the chose in action as at 14 February 2006.
23. As stated at paragraph 20, I allow the appeal.

(signed): J A H Martin QC

Chief Commissioner

3 March 2009