Northern Ireland - Social Security and Child Support Commissioners' Decisions

LC-v-Department for Social Development (IS) [2013] NICom 23

Decision No:  C18/10-11(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 July 2010

 

 

DECISION OF THE SOCIAL SECURITY COMMISSIONER

 

 

1.     The decision of the appeal tribunal dated 29 July 2010 is in error of law.  The error of law identified will be explained in more detail below.

 

2.     Pursuant to the powers conferred on me by Article 15(8) of the Social Security (Northern Ireland) Order 1998, I set aside the decision appealed against.  For further reasons set out below, I am unable to exercise the power conferred on me by Article 15(8)(a) of the Social Security (Northern Ireland) Order 1998 to give the decision which the appeal tribunal should have given.  This is because there will be further findings of fact which require to be made.  Further I do not consider it expedient to make such findings, at this stage of the proceedings.  Accordingly, I refer the case to a differently constituted appeal tribunal for re-determination.  In referring the case to a differently constituted appeal tribunal for re-determination, I direct that the appeal tribunal takes into account the guidance set out below.

 

3.     It is imperative that the appellant notes that while the decision of the appeal tribunal has been set aside, the issue of her entitlement to income support (IS) remains to be determined by another appeal tribunal.  In accordance with the guidance set out below, the newly constituted appeal tribunal will be undertaking its own determination of the legal and factual issues which arise in the appeal.

 

         Background

 

4.     On 21 September 2009 a decision-maker of the Department decided that the appellant should not have an entitlement to IS from and including 15 July 2009.  The particulars of that decision will be explored in more detail below.  On 15 October 2009 an appeal against the decision dated 21 September 2009 was received in the Department.  On 20 October 2009 the decision dated 21 September 2009 was looked at again but was not changed.

 

5.     Following an earlier adjournment of the appeal to facilitate the preparation of an addendum to the appeal submission, the substantive oral hearing of the appeal took place on 29 July 2010.  The appellant was present and was represented by the Citizens Advice organisation.  A Departmental presenting officer was present.  The appeal tribunal disallowed the appeal and issues a decision notice to the following effect:

 

‘Appeal disallowed

 

Appellant is not entitled to Income Support from and including 15.7.2009.’

 

6.     On 9 December 2010 an application for leave to appeal was received in the Appeals Service.  On 21 January 2011 the application for leave to appeal was granted by the legally qualified panel member (LQPM).  In granting leave to appeal the LQPM identified the following, as a point of law arising:

 

‘Was I correct to decide that the statutory disregard did not apply in this case?’

 

         Proceedings before the Social Security Commissioner

 

7.     On 3 March 2011 the appeal was received in the Office of the Social Security Commissioners.  On 13 April 2011 written observations on the appeal were sought from Decision Making Services (DMS) and these were received on 6 May 2011.  In these initial written observations, Mr Woods, for DMS, opposed the appeal on the ground cited by the appellant’s representative in the letter of appeal but agreed that the decision of the appeal tribunal was in error of law on the basis of another cited ground.  Written observations on the appeal were shared with the appellant and her representative on 19 May 2011.  On 16 June 2011 written observations in reply were received from Ms Kyne of the Citizens Advice organisation which were shared with Mr Woods on 22 June 2011.  On 11 July 2011 further observations were received from Mr Woods which were shared with the appellant and her representative on 14 July 2011.  A further submission was received from Ms Kyne on 28 July 2011.

 

8.     On 17 November 2011 I directed an oral hearing of the appeal.  The oral hearing took place on 5 January 2012.  The appellant was present and was represented by Mr Mitchell of the Citizens Advice organisation.  The Department was represented by Mr Woods from DMS.  Gratitude is extended to both representatives for their detailed and constructive observations, comments and suggestions.

 

9.     There then followed a delay in the promulgation of this decision occasioned, in part, by the expectation that certain of the issues arising in this appeal might be under consideration in another case.  As it turned out, the other case was determined without the requirement for those issues to be addressed.  Nonetheless, apologies are extended to the parties to the proceedings for the delay which has occurred.

 

         Errors of law

 

10.   A decision of an appeal tribunal may only be set aside by a Social Security Commissioner on the basis that it is in error of law.

 

11.   In R(I) 2/06 and CSDLA/500/2007, Tribunals of Commissioners in Great Britain have referred to the judgment of the Court of Appeal for England and Wales in R(Iran) v Secretary of State for the Home Department ([2005] EWCA Civ 982), outlining examples of commonly encountered errors of law in terms that can apply equally to appellate legal tribunals.  As set out at paragraph 30 of R(I) 2/06 these are:

 

“(i)       making perverse or irrational findings on a matter or matters that were material to the outcome (‘material matters’);

(ii)        failing to give reasons or any adequate reasons for findings on material matters;

(iii)       failing to take into account and/or resolve conflicts of fact or opinion on material matters;

(iv)       giving weight to immaterial matters;

(v)        making a material misdirection of law on any material matter;

(vi)       committing or permitting a procedural or other irregularity capable of making a material difference to the outcome or the fairness of proceedings; …

 

         Each of these grounds for detecting any error of law contains the word ‘material’ (or ‘immaterial’).  Errors of law of which it can be said that they would have made no difference to the outcome do not matter.”

 

         Why was the decision of the appeal tribunal in the instant case in error of law?

 

         What was the decision under appeal to the appeal tribunal?

 

12.   As was noted above, the decision under appeal to the appeal tribunal was a decision of the Department dated 21 September 2009.  A copy of that decision is attached to the original appeal submission as Tab No 4.  The decision at Tab No 4 is set out in some considerable detail, as follows:

 

‘I am superseding the decision of the decision maker dated 25/03/09.  This decision takes effect from 15/07/2009.  This is because there has been a relevant change of circumstances since the decision was made, namely that (the claimant) received an award of £35,000.00 compensation on 29/06/09.  An award of compensation for personal injury can normally be disregarded for a period of up to 52 weeks to give a customer time to decide what to do with the money.  However, if a customer lodges the money in an account and then withdraws or uses the money the money that is withdrawn/used can no longer be disregarded.  (The claimant) lodged the money from the compensation award in her bank account on 29/06/09 and then withdrew £5,000 on 10/07/09 and £25,000 on 15/07/09.

 

(The claimant) has provided receipts for a total expenditure of £6461.52 and has stated that she gave her parents £5,000.00.  No other proof of expenditure has been provided.  I have considered each of the receipts that (the claimant) has provided and decided … what expenditure to accept as a reduction in (the claimant’s) money.  From 15/07/2009 I have decided that (the claimant) should be treated as having notional savings of £30,454.83 and as this is more than the prescribed limit of £16,000.00 (the claimant) is not entitled to Income Support from 15/07/2009.  (The claimant) is treated as having notional savings of £30,454.83 because not all the money she spent is accepted as reasonable and (the claimant) has not accounted for approximately £25,000.00 of the money she received from the compensation award.  (The claimant) has not provided receipts to show how she spent the money but she has provided bank statements to show that the money was withdrawn and has stated that she used the money to pay for household furniture and improvements.  I have decided that (the claimant) should be treated as having notional savings of £30454.83 from 15/07/2009 because she has stated that she no longer has the money and I believe that she deprived herself of this money and a significant purpose for doing so was to continue to receive Income Support.

 

My decision is that (the claimant) is not entitled [sic] Income Support from and including 15/07/2009.

 

THE LAW USED TO MAKE THIS DECISION

 

Article 11 of the Social Security (Northern Ireland) Order 1998 and regulations 6(2)(a)(i) and 7(2)(a) and Schedule 2A of the Social Security (Decisions and Appeals) Regulations (NI) 1999, Social Security Contributions and Benefits Act 1992 paragraph 130(1), Income Support (General) Regulations 1987 regulation 51(1) and Schedule 10 paragraph 12A(1)(2)(c).’

 

13.   It is important to note that this decision was a supersession decision.  It sought to supersede an earlier decision of the Department dated 25 March 2009.  In the file of papers which is before me there is no copy of any decision dated 25 March 2009.  Accordingly, I cannot be certain what was the nature and effect of that decision.  In the ‘Facts of the Case’ section of the original appeal submission, the appeals writer has stated that the appellant’s ‘… current claim for Income Support was made on 08/01/09.’  Although I cannot be certain, I am of the view that the decision-making process was as follows.  A claim to IS was made from 8 January 2009.  A decision-maker, on 25 March 2009, decided that there was entitlement to IS from and including 8 January 2009.

 

14.   I return to the supersession decision of 21 September 2009, which was the decision under appeal to the appeal tribunal in the instant case.  The supersession was stated to be on the basis that there had been a relevant change of circumstances since the decision made on 25 March 2009.  The decision-maker decided that what had changed was that the appellant had, since the decision of 25 March 2009, come into possession of a capital asset.  That capital asset was in excess of the prescribed capital limits for entitlement to IS and could not be disregarded under any of the capital disregard rules.  The effect of the supersession decision was stated to be 15 July 2009.  I will examine below whether the decision-maker on 21 September 2009 was correct to classify the capital asset as notional capital.

 

         What did the appeal tribunal decide?

 

15.   The statement of reasons for the appeal tribunal’s decision reads as follows:

 

‘The Tribunal is satisfied that the decision dated 21 September 2009 (as reconsidered on 20 October 2009) was properly made.  The appellant sought to rely at Hearing on the statutory disregard.  That disregard is in place so that a claimant can decide what to do with a capital sum during the 52 week period.  However if a claimant lodges money into an account and then withdraws or uses the money, the money so withdrawn or used can no longer be disregarded.  In this case the appellant received compensation of £35,000 on 29 June 2009.  She placed the monies in a bank account and engaged in various withdrawals.  She provided receipts in respect of some expenditure and informed the Tribunal at Hearing that she went on holidays to Tunisia and Turkey.  She spent upwards of £6,000 on those holidays.  Her oral evidence was that she no longer has any of the money.  Despite this the Tribunal is satisfied that she is not entitled to Income Support.  She used the money during the period of the statutory disregard and the Department were entitled to treat her as having notional capital of £35,454.83 from 15 July 2009.  The Tribunal is also satisfied that she deprived herself of her capital and that such a deprivation and that a significant operative purpose for doing so was to continue receiving Income Support.  Her appeal is disallowed.’

 

         The relevant legislative background

 

16.   Regulation 46 of the Income Support (General) Regulations (Northern Ireland) 1987, as amended, provides:

 

‘(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 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).’

 

Paragraph 12A of Schedule 10 provides:

 

‘(1) Any payment made to the claimant or the claimant’s partner in consequence of any personal injury to the claimant or, as the case may be, the claimant’s partner.

 

(2) But sub-paragraph (1)-

 

(a) applies only for the period of 52 weeks beginning with the day on which the claimant first receives any payment in consequence of that personal injury;

 

(b) does not apply to any subsequent payment made to him in consequence of that injury (whether it is made by the same person or another);

 

(c) ceases to apply to the payment or any part of the payment from the day on which the claimant no longer possesses it;

 

(d) does not apply to any payment from a trust where the funds of the trust are derived from a payment made in consequence of any personal injury to the claimant.

 

(3) For the purposes of sub-paragraph (2)(c), the circumstances in which a claimant no longer possesses a payment or part of it include where the claimant has used a payment or part of it to purchase an asset.

 

(4) References in sub-paragraphs (2) and (3) to the claimant are to be construed as including references to his partner (where applicable).’

 

         The submissions of the parties - the capital disregard issue

 

17.   In the original application for leave to appeal which was before the LQPM and which was replicated as the appeal, Ms Kyne made the following submission.  Paragraph 12A of Schedule 10 to the Income Support (General) Regulations (Northern Ireland) 1987, as amended, permits a 52 week period during the entirety of which a claimant may spend any capital sum awarded due to a personal injury.  Accordingly, the conclusion of the appeal tribunal in the instant case that the disregard ceased on the withdrawal of the capital sums resultant from the personal injury compensation was in error of law.  In support of her submission on the effect of Paragraph 12A of Schedule 10, Ms Kyne cited from paragraph 2.791 of Volume 11 of Social Security Legislation 2010/2011, as follows:

 

‘Paragraph 12A provides for a general capital disregard of payments for personal injury … The disregard applied to a payment made in consequence of a personal injury to either the claimant or the claimant’s partner.  It does not apply to payments from a trust fund.  But note that the disregard applied for 52 weeks from the date that the claimant first receives any payment (even if made by another person).  This is because the purpose of the disregard is to introduce a “grace period” during which a trust fund can be set up (the disregard to para. 12 will then apply), or an annuity purchased (see the disregard in para 11), or the money spent.’

 

18.   In his written observations on the appeal, Mr Woods addressed the issue of the effect of the disregard in Paragraph 12A of Schedule 10.  After citing the relevant legislation, he submitted that:

 

‘… it is quite specific in sub-paragraph (2)(c) that the disregard ends from the day from which the claimant no longer possesses it or a part of it.  It would then follow that as she disposed of the capital, it no longer falls to be disregarded.  Policy papers state that the primary intention behind paragraph 12A was to create a “grace period” to allow claimants in receipt of a personal injury payment to make arrangements to place that sum in trust.  This “grace period” can last up to 52 weeks but ceases to apply to the payment or any part of the payment as soon as the claimant no longer possesses it in accordance with sub-paragraph 2(c).

 

I would submit that essentially, paragraph 12A was introduced to help claimants by allowing them time to make arrangements to secure their future on a long term basis without incurring any adverse effect to their entitlement to benefit, i.e. to place personal injury payments into trust.  It was not brought into operation to disregard the usual capital rules when any or all of the capital is spent and I submit that paragraphs (2)(c) and (3) serve to confirm this.  When the payment or part of the payment is no longer in possession of the claimant, it ceases to be disregarded under the “grace period”.  If the payment, or part of the payment, is no longer disregarded then it has to be taken into consideration, which must also apply to the reason as to why the claimant no longer possesses it.  In such circumstances, the claimant will continue to have to account for any sums that she no longer possesses.

 

In other words, on each occasion that the claimant no longer possesses any part of the money a decision maker on behalf of the Department needs to establish what the claimant used the money for.  If the claimant used the money or part of it to purchase an asset (sub-paragraph 3) then that asset would be taken into account as capital unless disregarded elsewhere in Schedule 10.  If the claimant used the money for some other purpose then the decision maker would have to consider notional capital in line with regulation 51.  As such I do not agree that the Tribunal have erred on the ground cited by (the claimant’s) representative.’

 

19.   In her further observations on the appeal, Ms Kyne made reference to the policy background referred to by Mr Woods.  Further, she submitted that the wording of the capital provisions, and, more particularly, the capital disregard provisions in the housing benefit (HB) scheme were identical to those in the IS scheme.  Having cited Paragraph 15 of Schedule 6 to the Housing Benefit Regulations (Northern Ireland) 2006, she refers to the guidance given to decision-makers in respect of the application of the Paragraph 15 disregard and submits that the ‘… correct application of Article 12A is that the Appellant was entitled to spend her compensation money during the statutory period.’

 

20.   In further written observations, Mr Woods cited the following extract from ‘policy guidance documents’ which had been provided in connection with Paragraph 12A of Schedule 10 to the Income Support (General) Regulations (Northern Ireland) 1987:

 

‘52 week Grace Period

 

The start date of this change is 2nd October 2006.  However, we need for the change to start from a full benefit week to ensure that staff are not required to calculate part week payments when changing from the old rules to the new rules.  Therefore we would prefer for this change to start from the first full benefit week following 2nd October.  In addition once the claimant has spent their lump sum payment, whether that be to purchase a trust fund, annuity or any other item, the 52-week grace period should end.  Therefore the grace period is either 52 weeks or when the claimant spends the payment whichever comes first.

 

In answer to your questions:

 

a) I have spoken to strategy and for the moment pending further discussion the grace period will apply only once.  Therefore if a PI payment is made in instalments the grace period should start from the date the initial instalment is made.

 

b) Where a second instalment is made within the 52-week grace period then the balance of the grace period would apply.

 

c) The grace period should end once the claimant has purchased a trust fund, annuity or spent the money in some other way.  The whole purpose of the 52-week grace period is to give a claimant time to place money into a Trust Fund.  Once that has been done the main purpose of the grace period has then been discharged.  If for whatever reason the customer then decides to take the money out then we want to treat any resultant capital in the normal way and not have regard to any 'unspent' portion of the 52-week grace period.’

 

21.   Mr Woods submitted that ‘… this shows that the whole purpose of the 52-week grace period is to give a claimant time to place money in a Trust Fund.’  In connection with Ms Kyne’s submission in connection with the parallel HB provisions, Mr Woods submitted that he agrees that the appellant was entitled to spend her compensation payments at any time:

 

‘…this paragraph states if during the 52 week disregard period any of the money is spent the disregard no longer applies to that part of the payment.  The normal rules regarding capital both actual and notional would then apply to that spent part of the payment.  I would submit that this view is supported by the inclusion of sub-paragraph (3) of paragraph 12A which provides:

 

“For the purposes of sub-paragraph (2)(c), the circumstances in which a claimant no longer possesses a payment or part of it include where the claimant has used a payment or part of it to purchase an asset.”

 

In other words if the claimant purchases an asset with the money then unless any of the other disregards in Schedule 10 apply, it will then be taken into account as capital’.

 

         The submissions of the parties - the capital issue

 

22.   In the case summary prepared for the oral hearing of the appeal, Mr Woods submitted that:

 

(The claimant) provided receipts to the total of £6,461.52, of which the decision maker accepted that £4,545.17 was reasonable expenditure.  She also stated that the she gave £5,000 to her parents.  She did not provide any evidence as to the expenditure of the remainder of the £35,000 [£23,538.48].  I submit that having established that (the claimant) had not accounted for £23,538.48 of the payment, the decision maker incorrectly treated this amount as notional capital instead of actual capital.  Subsequently the decision maker then added it to the £6,916.35 [£5,000 + £1,916.35] that he had already decided she had deprived herself of for the purpose of continuing to receive income support, giving a total notional capital figure of £30,454.83.

 

I submit that by adopting the Department’s decision the Tribunal have erred by accepting the £23,538.48 as notional capital and not unaccounted for actual capital.  This is crucial in this case; as if (the claimant) still has the actual capital then it would still attract the disregard for a maximum of 52 weeks.

 

I further submit that most of the receipts provided by (the claimant) are dated after the effective date of the decision [15 July 2009] and as such should not have been included in any notional capital decision for that date, as she still possessed the money.  I would therefore submit that the Tribunal have erred in this respect again by adopting the Department’s decision.

 

I would submit that in exercising its inquisitorial role, when considering how to approach the issues of notional and actual capital relevant to benefit entitlement, the Tribunal should have followed the guidance given at paragraph 17 of GB Commissioner’s decision R2/09(IS).  This approach has since been followed by NI Commissioner Mullan in his decision C7/10-11(IS).  I would submit that the Tribunal erred in not making a distinction between actual and notional capital.’

 

23.   It is important to note that the decision in R2/09(IS) was a decision of the Chief Commissioner in Northern Ireland rather than a decision of a Social Security Commissioner in Great Britain.

 

24.   In the case summary prepared on behalf of the appellant for the oral hearing of the appeal, it was submitted that:

 

‘We are in agreement with the Department’s contention that the Tribunal erred in law in not exercising its inquisitorial function by adopting the department’s submission that £25,000 (which the Department states was unaccounted for), as a notional capital figure.’

 

         Analysis

 

25.   I begin with consideration of whether the decision-maker, as part of the decision dated 21 September 2009, was correct to conclude that as of 15 July 2009, the appellant had notional capital assets of £30,454.83.  I begin by noting that the decision dated 21 September and as set out above and at Tab No 4 of the original appeal submission, represents a direct and honest endeavour to apply the evidence concerning capital acquisition to the rules of entitlement to IS, including the capital and capital disregard provisions.

 

26.   It is important to note the sequence of events such as they happened.  The evidence from the appellant’s bank statements confirm that on 26 June 2009, the appellant’s current account was overdrawn in the sum of £395.21.  The sum of £35,000 was lodged to the current account on 29 June 2009.  Between 29 June 2009 and 2 July 2009 the sum of £2,370 was withdrawn.  On 10 July 2009, a further £5,000 was withdrawn.  On 15 July 2009, £25,000 was withdrawn.

 

27.   In the decision dated 21 September 2009, the decision-maker noted that the appellant had provided receipts for expenditure totalling £6,461.52 and from this accepted that expenditure of £4,545.17 should be ‘allowed’.  The decision-maker deducted the sum of £4,545.17 from the figure of £35,000 to arrive at a figure of £30,454.83.  The decision-maker then recorded:

 

‘I have decided that (the claimant) should be treated as having notional savings of £30454.83 from 15/07/2009 because she has stated that she no longer has the money and I believe that she deprived herself of this money and a significant purpose for doing so was to continue to receive Income Support.’

 

28.   The problematic aspect of that decision is as follows.  The decision-maker has decided that the figures for notional capital applied to the appellant as of 15 July 2009.  As was noted above, the sum of £25,000 was withdrawn from the appellant’s current account on 15 July 2009.  The sum of £5,000 was withdrawn from the same bank account two weeks earlier.  The appellant’s evidence to the Department and repeated to the appeal tribunal that the money was dissipated in its entirety over a period of time up to and including 2009.  It seems to me that it is highly unlikely that the sum of £25,000 was spent on 15 July 2009 that is the day on which it was withdrawn from the appellant’s current account.  In respect of the dissipation of the funds, it is important to note the majority of the receipts considered by the decision-maker when formulating the decision dated 21 September 2009 post-dated 15 July 2009.  With respect to the decision-maker the focus should have been on whether the appellant was in possession of actual capital on 15 July 2009.

 

29.   Why does it matter whether the capital was actual or notional if, at the relevant date, the amount of that capital was in excess of the prescribed capital limits for entitlement to IS?  It matters because of the potential application of the capital disregard rule in Paragraph 12A of Schedule 10 to the Income Support (General) Regulations (Northern Ireland) 1987, as amended.

 

30.   The origin of Paragraph 12A lies in the intentions of the United Kingdom Parliament in 2005 to introduce a capital disregard for lump sum personal injury payments in connection with entitlement to a number of social security benefits including IS.  In the Pre-Budget Report, published by HM treasury in December 2005 (2005 Cm 6701), the Chancellor announced the following, at paragraphs 5.78:

 

‘All charitable, voluntary and personal injury income payments are already disregarded in Pension Credit and pension-age Housing Benefit and Council Tax Benefit.  To further simplify the tax and benefit system, the Government will from October 2006 disregard in full all charitable, voluntary and personal injury income payments when assessing eligibility for Income Support and Jobseeker’s Allowance.  This will enable charities to direct support to individuals without affecting their entitlement to these benefits.  The Government will also from October 2006 provide a 52 week grace period for lump sum personal injury payments when assessing eligibility for Income Support, Jobseeker’s Allowance, and working-age Housing Benefit and Council Tax Benefit.’

 

31.   There then followed, in Great Britain, the making of the Social Security (Miscellaneous Amendments) (No. 4) Regulations 2006 (SI 2006 No 2378).  Regulation 5(11)(B) inserted an exact equivalent Paragraph 12A into the Income Support (General) Regulations 1987, as amended.  It is worth noting, at this stage, that the Explanatory Memorandum to the Social Security (Miscellaneous Amendments) (No. 4) Regulations 2006 states the following, at paragraphs 4.1.i and 7.1, in connection with the policy background to Paragraph 12A:

 

‘Following the London bombings, the Chancellor announced, in his PBR statement, a number of changes to the way in which with lump sum personal injury payments, charitable and voluntary income payments and income derived from personal injury payments held in trust or in an annuity are dealt with.  At the same time, the DCA announced changes to their investment and banking activities for personal injury awards held in court.

 

…

 

Following the Chancellor’s PBR announcement in December 2005, the existing Regulations are amended to create a disregard for a maximum period of 52-weeks of lump sum payments made in consequence of any personal injury to the claimant or their partner.  The new disregard will commence when the first payment is received for a particular personal injury, ceasing when the money is no longer possessed or after 52 weeks, whichever comes first.’

 

32.   The picture is completed by the making of the Social Security (Miscellaneous Amendments No. 4) Regulations (Northern Ireland) 2006 (SR 2006 No 359).  Regulation 5(10)(a) inserted the present Paragraph 12A into the Income Support (General) Regulations (Northern Ireland) 1987, as amended.

 

33.   I turn to the submissions made by Ms Kyne in connection with the nature and effect of Paragraph 12A.  As was noted above, Ms Kyne submitted that Paragraph 12A permits a 52 week period during the entirety of which a claimant may spend any capital sum awarded due to a personal injury.  Accordingly, the conclusion of the appeal tribunal in the instant case that the disregard ceased on the withdrawal of the capital sums resultant from the personal injury compensation was in error of law.

 

34.   In response, Mr Woods submitted that sub-paragraph (2)(c) of Paragraph 12A was quite specific that the disregard ends from the day from which the claimant no longer possesses capital derived from a personal injury payment or a part of it.  The primary intention behind paragraph 12A was to create a “grace period” to allow claimants in receipt of a personal injury payment to make arrangements to place that sum in trust.  This “grace period” can last up to 52 weeks but ceases to apply to the payment or any part of the payment as soon as the claimant no longer possesses it in accordance with sub-paragraph 2(c).

 

35.   With respect to Ms Kyne I have to reject her interpretation of the nature and purpose of Paragraph 12A and accept the alternative proposed by Mr Woods.  Ms Kyne is correct to submit that the appellant is entitled to spend part or all of the capital sum derived from her personal injury payment.  It is also correct to say that the appellant is entitled to derive the benefit of the capital disregard period for so long as she continues to possess the capital derived from her personal injury payment or until the capital disregard rule becomes meaningless because the capital limit falls below the prescribed limits for entitlement to IS.  The appellant is not entitled, however, to derive the benefit of the entire capital disregard period of 52 weeks from the day on which she no longer possess the capital derived from her personal injury payment.  To give an example unrelated to the present case, if a claimant received a personal injury lump sum capital payment of £50,000 on 1 January 2013 and by 1 February 2013 had dissipated the entirety of the capital funds then (subject to additional rules concerning the purchase of assets) the capital disregard rule ceases to apply from 1 February 2013.

 

36.   To that extent the rules in Paragraph 12A and, in particular, sub-paragraph (2) and (2)(c) are clear.  I note that in support of her submission on the effect of Paragraph 12A, Ms Kyne cited from paragraph 2.791 of Volume 11 of Social Security Legislation 2010/2011.  What she omitted from the cited paragraph was the immediately following sentence which states:

 

‘The disregard under papa 12A will cease to apply to the payment any any of it when the claimant no longer possesses it.’

 

37.   Ms Kyne submits that the decision-makers responsible for decisions on entitlement to HB take a different view of the nature and effect of the parallel capital disregard rule in Paragraph 15 of Schedule 6 to the Housing Benefit Regulations (Northern Ireland) 2006.  Paragraph 15 is in equivalent terms to that of Paragraph 12A.  With respect to the decision-makers responsible for HB, I fail to see how an alternative interpretation of Paragraph 15 is possible.

 

38.   Why, therefore, was the decision of the appeal tribunal in error of law?  The appeal tribunal endorsed the decision of the decision-maker of the Department in deciding that, at 15 July 2009, the appellant possessed notional capital in excess of the prescribed capital limits for entitlement to IS.  For the reasons which I have outlined above, the decision-maker’s, and, accordingly, the appeal tribunal’s emphasis should have been on (i) the extent to which the appellant, on 15 July 2009, was in possession of actual capital derived from a personal injury payment, (ii) the manner in which any actual capital derived from the personal injury payment was dissipated from the date on which the appellant received the payment and (iii) the applicability of the capital disregard rule in Paragraph 12A of Schedule 10 to the Income Support (General) Regulations (Northern Ireland) 1987 applied to the appellant.  To the extent that the appeal tribunal failed to focus on those issues, its decision is in error of law.

 

39.   I would note, in addition, that the appeal tribunal ascribed an incorrect figure to the amount of notional capital which it found was in the possession of the appellant at the relevant date but nothing turns in that recording error.

 

         Disposal

 

40.   The Department is directed to prepare a new submission for the further oral hearing of the appeal before a differently constituted appeal tribunal.  The further submission should be guided by the detailed submissions on the issues arising in the appeal which were set out by Mr Woods in his various written observations to the Social Security Commissioners in this appeal.

 

41.   The new submission must address the question of the extent to which the appellant was in possession of actual and notional capital from the date of the receipt by the appellant of a capital asset derived from the personal injury payment.  The new submission should also set out how the capital disregard rule in Paragraph 12A of Schedule 10 to the Income Support (General) Regulations (Northern Ireland) 1987 applied to the appellant’s possession of actual capital and her entitlement to IS.

 

42.   The appeal tribunal will have to undertake a careful and forensic fact-finding exercise, to the extent to which that is possible, to ascertain how and when the appellant’s capital asset derived from her personal injury payment and received by her on 29 June 2009 was dissipated, when that capital asset was dissipated in its entirety and the appellant’s purpose in the dissipation of that capital asset.

 

43.   The appeal tribunal will have to decide (i) whether and when the appellant was in possession of actual capital (ii) the impact of the capital disregard rule on her possession of actual capital and (iii) when and whether the appellant was in possession of notional capital.

 

44.   The appeal tribunal is to note that specific guidance on the proper approach to the capital rules as they impact on entitlement to social security benefits is to be found in the decision of the Chief Social Security Commissioner for Northern Ireland in R2/09 (IS).

 

 

(signed):  K Mullan

 

Chief Commissioner

 

 

 

3 May 2013