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[1992] UKSSCSC CIS_18_1990 (04 September 1992)

R(IS) 14/93

Mr. D. G. Rice CIS/18/1990
4.9.92

Notional capital - deprivation of capital before income support was introduced - whether deprivation capable of being "for the purposes of securing entitlement to income support"

In November 1987 the claimant received £38,777.45 from the sale of the matrimonial home. On 19 November 1987 he deposited £28,000 in his bank. He withdrew various sums including £8,000 on 30 November 1987 and £18,500 on 3 December 1987. On 21 December 1987 his account was overdrawn. On 16 December 1987 he claimed supplementary benefit. On 15 March 1988 the adjudication officer disallowed the claim. On 1 February 1989 the social security appeal tribunal dismissed his appeal on the basis that he possessed actual capital in excess of the prescribed limit of £3,000. They did not believe the claimant's statement that he had paid £18,500 to his creditors. On 13 February 1989 he claimed income support. On 20 March 1989 the adjudication officer disallowed the claim on the basis that he possessed actual capital in excess of the prescribed limit of £6,000. On appeal the tribunal found that the claimant had not actual capital and intimated that they wished to consider the difficult question whether the claimant had notional capital under regulation 51(1). They refused the adjudication officer's application for an adjournment. They decided by majority that he had deprived himself of a considerable capital sum for the purposes of obtaining supplementary benefit but found unanimously that that did not affect his claim for income support. On appeal the adjudication officer conceded in his written submission to the Commissioner that the claimant, at the relevant time, had no actual capital.

Held that:

the Commissioner has inquisitorial jurisdiction and has to consider every point relevant to the issue, whether put forward by the parties or not and he was not bound by any concession made by either party (para. 7);

the adjudication officer was expected to deal with the question whether or not the claimant had actual capital in excess of the prescribed limit. When the tribunal concluded that he had not, an extremely difficult point of law (whether he had any notional capital) arose. In those circumstances the adjudication officer should have been given an adjournment to consider his arguments on the issue (para. 8);

it is puzzling why it was that regulation 51(1) was not drafted with the words "supplementary benefit or" between the words "to" and "income support". Without such express words there is a strong case for saying that the legislature never intended regulation 51(1) to embrace the deprivation for the purposes of securing entitlement to supplementary benefit (para. 13);

regulation 51(1) was not a new provision. It came into existence with the income support legislation which conferred benefits, and the regulation posed a restriction on such benefits. This was not a case where, after income support had come with its concomitant benefits into operation, the regulation was subsequently brought into existence operating in response to events which had previously taken place (Yew Bon Tew v. Kenderaan Bas Mara (PC) [1983] AC considered) (paras. 15-16);

there is nothing to prevent regulation 51(1) operating retrospectively if its provisions are relevant to the facts in question. At the time the claimant divested himself of the property income support did not exist. It is difficult to see how a person could deprive himself of property for the purposes of obtaining income support, if such benefit at that time was non-existent (Secretary of State for Social Security and Another v. Tunnicliffe [1991] 2 ALL ER 712 followed [R(G) 4/91]; unreported decision CIS/259/1990 not followed) (paras. 15-16);

when the claimant divested himself of capital in November/December 1987 he simply could not have done it with the intention of obtaining income support because that was a benefit which, not withstanding that the Royal Assent had been given to the Social Security Act 1986, at that time still did not exist. Nor could it be said that the description "income support" only meant the means tested benefit which previously went under the name "supplementary benefit". Although the income support scheme and the supplementary benefit scheme have characteristics in common, including means testing, they are in no sense identical. The benefits are differently calculated and the income scheme was drafted afresh as a wholly new scheme (para. 16).

DECISION OF THE SOCIAL SECURITY COMMISSIONER

My decision is that the decision of the social security appeal tribunal given on 30 August 1989 is erroneous in point of law and accordingly I set it aside. As it is expedient that I give the decision the tribunal should have given, I further decide that the claimant is not disentitled to income support from 13 February 1989 on the ground that he possessed at that date capital, either actual or notional, in excess of the prescribed limit.

This is an appeal by the adjudication officer, brought with the leave of the tribunal chairman, against the decision of the social security appeal tribunal of 30 August 1989. The claimant asked for an oral hearing, a request which was acceded to. At that hearing the claimant, who was not present, was represented by Mr. Michael Shrimpton of Counsel, instructed by the Plumstead Community Law Centre, whilst the adjudication officer appeared by Mr. N. Butt of the Solicitor's Office of the Departments of Health and Social Security. I am indebted to both of them for their submissions.

A statement from the claimant's solicitors dated 11 November 1987 revealed that he had received from the sale of what had once been the matrimonial home of himself and his former wife the sum of £38,777.45. This represented half of the proceeds of sale less certain retentions made by his solicitors. A bank statement from Allied Irish Banks PLC shows that on 19 November 1987 the claimant made a deposit of £28,000, and that such deposit was reduced by various debits over the period from 23 November 1987 to 21 December 1987, in particular a debit on 30 November 1987 of £8,000 and a debit on 3 December 1987 of £18,500. On 21 December 1987 the claimant was in arrears to the bank to the extent of £300.42.

On 16 December 1987 the claimant applied for supplementary benefit. On 15 March 1988 the adjudication officer rejected the claim. In due course, the claimant appealed to the tribunal who on 1 February 1989 upheld the adjudication officer's decision. They were satisfied that the claimant had, at the date of claim, actual capital resources in excess of the statutory minimum, then £3,000. In particular, they did not believe that the £18,500 withdrawn on 3 December 1987 from his bank account had been applied in paying his creditors. They considered the whole matter a sham devised to obtain supplementary benefit. They were satisfied that he had retained this sum for himself in the hands of his son, Kevin. They said inter alia as follows:

"But [the claimant] overstrained our credulity in saying that he withdrew £18,500 with the intention of using it to pay his creditors, and gave it to his son Kevin to 'mind' for him, at the beginning of December while he 'sorted himself out'; and that he left the £18,500 with Kevin for a month before using it to pay off some of his debts (totalling even without Malcolm's debt, £20,950) in January. We could see no conceivable reason for this manoeuvre, connected with repaying [the claimant's] creditors. The only reason which we could infer, from the timing, of the manoeuvre was to deplete [the claimant's] capital so that when he claimed supplementary benefit on 16 December 1987 his bank account was almost empty.

Since we were unable to accept [the claimant's] evidence on this matter or at all we found that at least £18,500 was available to him when he claimed supplementary benefit. He had merely moved it from his bank account to his son's care.

This was enough to defeat [the claimant's] claim of 16 December 1987 to supplementary benefit …

It was therefore not necessary for us to make the findings of fact appropriate to reg. 4(1) Resources Regs. …"

On 13 February 1989 the claimant applied for income support. However, on 20 March 1989 the adjudication officer disallowed the claim on the basis that the claimant possessed capital which exceeded the prescribed amount of £6,000. In due course, the claimant appealed to the tribunal, who in the event allowed the appeal, and awarded income support from 13 February 1989. They found that the claimant had no capital or income at the date of claim. They said:

"Having had the advantage of seeing [the claimant] and questioning him the tribunal were entirely satisfied that he had no actual capital as at 13 February 1989."

Unfortunately, Mr. Butt has argued before me, the tribunal failed to explain why they reached the conclusion they did. It was not enough merely to say that they had seen the claimant and questioned him. A fuller explanation was called for as to why they accepted his statement that he had no capital. Mr. Butt further argued that even a reference to the chairman's note of evidence afforded insufficient explanation. The relevant part of the chairman's note of evidence reads as follows:

"[The claimant] in reply to Chairman said he handed £18,500 to his son, Kevin, as he was drinking and gambling heavily having lost his home, his business and his family.

The adjudication officer questioned [the claimant] as to evidence of various loans and [the claimant] replied that they were all from friends he had in the building business and it was always understood they would be repaid out of the proceeds of sale of the house. Some of the repayments were made by Kevin.

Mrs. Viinikka (tribunal member) asked [the claimant] what money was still held by Kevin for him and he replied there was none.

Mrs. Sainsbury (tribunal member) suggested to [the claimant] that he had been extravagant and [the claimant] did not dispute this.

The tribunal then asked the parties to withdraw and after a short deliberation re-called the parties and the Chairman announced that the tribunal were satisfied that [the claimant] had no actual capital at 13 February 1989."

Albeit with some hesitation, I reject Mr. Butt's submission. Although the earlier tribunal who considered the claim for supplementary benefit were extremely sceptical of the claimant's veracity, it is clear that the tribunal of 30 August 1989 were prepared to accept the claimant's statements without requiring corroboration. In particular, they did not seek to hear evidence from Kevin. However, the tribunal were free to accept the claimant's oral evidence. They saw and heard him, and were clearly prepared to believe him. It was a matter for them. I do not consider that it is open to me to interfere with the findings of the tribunal.

However, before leaving the above matter, there is one detail of this case to which I should refer. In the written submissions of the adjudication officer a concession was made that the claimant was at the relevant time without capital resources. However, in his oral submissions to me Mr. Butt resiled from that concession, and contended that this was very much an open question which fell for consideration. Mr. Shrimpton complained in no uncertain terms that he was taken by surprise. Although he did not seek an adjournment to deal with the point, he complained that there should have been some indication that the Department's attitude had changed. He went further, and argued that the Department were, in view of their concession in the written submissions, precluded from resiling therefrom. The position was analogous to pleadings. Whilst I appreciated Mr. Shrimpton's irritation at the change of attitude on the part of the adjudication officer, I pointed out to him that, as this was an inquisitorial jurisdiction, I had to consider every point relevant to the issue, whether put forward by the parties or not, and for that matter I was not bound by any concession made by either party. Mr. Shrimpton contended that this was not an inquisitorial, but an adversarial jurisdiction. I rejected that contention. It has always been accepted that this jurisdiction is inquisitorial in nature, a point emphasised at paragraph 14 of CIS/360/1991 where specific reference is made, in support of the proposition, to Reg v. Medical Appeal Tribunal (North Midland Region) ex parte Hubble [1958] 2 QB 228 at page 240; R v. Deputy Industrial Injuries Commissioner ex parte Moore [1965] 1 QB 456 at pages 486-7 and to the following reported cases R(U) 5/77; R(I) 6/81; R(S) 4/82 (T); R(F) 1/83; R(SB) 2/83 (T); R(S) 1/87. However, for the reasons given above, the tribunal were, in my judgment, entitled to take the view that, at the date of claim, the claimant was without capital resources, so that nothing turns on Mr. Butt's resiling from the original concession.

Mr. Butt then argued that, when the tribunal decided that the claimant did not have capital resources over the statutory limit, and intimated that they wished to consider the difficult question of whether the claimant was caught by regulation 51(1) of the Income Support (General) Regulations 1987 [SI 1987 No. 1967], they should have given the adjudication officer the opportunity of an adjournment to consider the new situation. The adjudication officer had formally requested such an adjournment, but doubtless with the laudable object of disposing of the whole matter there and then, the tribunal had refused the request and had gone to decide the very difficult point arising out of regulation 51(1). I think there is force in Mr. Butt's contention. The question with which the adjudication officer expected to deal was whether or not the claimant had actual resources in excess of the statutory limit. When the tribunal concluded that he had not, then an extremely difficult point of law arose before the matter could finally be disposed of, namely, whether the claimant had notional resources under regulation 51(1). In those circumstances the adjudication officer should have been given an adjournment to consider his arguments on this issue. Accordingly, on that ground I must set aside the tribunal's decision.

Mr. Butt also pointed out that the tribunal did not explain why, having accepted that the claimant had in November/December 1987 deprived himself of capital for the purposes of claiming supplementary benefit, they did not also accept that he had done likewise for the purposes of claiming income support. All that the tribunal said was:

"By a majority the tribunal thought there was overwhelming evidence that he had deprived himself of considerable capital for the purposes of obtaining supplementary benefit but in the unanimous view of the tribunal this did not affect his claim for income support."

The effect of a claimant's depriving himself of capital resources, at a time when supplementary benefit alone was in operation, on his right to income support raises problems of great complexity and difficulty, and the adjudication officer has been left in the dark as to how the tribunal reached the conclusion they did. Accordingly, on that ground also I must set aside the tribunal's decision as being erroneous in point of law.

However, I do not think it is necessary for me to remit the matter to a new tribunal for rehearing. I have had the benefit of legal argument over the effect of regulation 51(1), and I can conveniently dispose of the matter by substituting my own decision for that of the tribunal.

The tribunal accepted that the claimant had divested himself of the relevant capital in November/December 1987. As I have said, the tribunal were entitled to reach that conclusion, and I am content myself to adopt it. The tribunal also decided that such divesting was for the purposes of claiming supplementary benefit. Mr. Shrimpton's contention was that, whether it was or was not, such divesting could not operate to prejudice the claimant's claim for income support. The crucial regulation is regulation 51(1) of the Income Support (General) Regulations 1987. This reads as follows:

"51.- (1) A claimant shall be treated as possessing capital of which he has deprived himself for the purposes of securing entitlement to income support or increasing the amount of that benefit …"

A similar provision operated under the supplementary benefit legislation. The relevant regulation was regulation 4(1) of the Supplementary Benefit (Resources) Regulations 1981 [SI 1981 No. 1527]. Mr. Shrimpton's contention was that, even if the act of deprivation in this case served to bring into effect regulation 4(1), so as to render the claimant disentitled to supplementary benefit, such act of deprivation did not activate regulation 51(1). The question of notional capital did not arise. The claimant remained entitled to income support. He had no actual capital, or at any rate, insofar as he had actual capital, it was well below the maximum limit, and he could not be deemed to be possessed of the capital of which he had deprived himself.

Mr. Butt argued that Mr. Shrimpton's contention was wholly without merit. Income support merely replaced supplementary benefit. Regulation 51(1) was in effect a re-enactment (with only minor amendments) of regulation 4(1), and if a claimant was not entitled to supplementary benefit because he was caught by regulation 4(1), he should likewise be caught in any application for income support by regulation 51(1). Mr. Butt invoked, in support of his contention, the decision CIS/259/1990. As regards that decision, I should mention that it was at one time the subject matter of appeal to the Court of Appeal. However, one of the issues in that case was the issue now before me, namely the effect of regulation 51(1) where the relevant divestment of capital took place during the operation of the supplementary benefit, and not the income support, legislation, but this particular issue was never considered by the Court of Appeal. In the event, by a consent order the decision was set aside, but, I am told, on grounds wholly unconnected with the point before me. Accordingly, the force of that decision on the effect of regulation 51(1) remains unimpaired.

Mr. Shrimpton argued that, if it had been the intention of the legislature that regulation 51(1) should bite on transactions carried out with reference to claims for supplementary benefit, the draftsman could have expressly so provided. He drew my attention to paragraph 10 of Schedule 10 to the Income Support (General) Regulations, which listed capital to be disregarded. Paragraph 10 provides as follows:

"Any personal possessions except those which had or have been acquired by the claimant with the intention of reducing his capital in order to secure entitlement to supplementary benefit or income support or to increase the amount of that benefit."

Clearly, he argued, if the legislature intended regulation 51(1) to bite on acts of deprivation undertaken to enable the claimant to obtain supplementary benefit it could have been expressly so provided. I see the force of that submission, and find it puzzling why it was that regulation 51(1) was not drafted with the words "supplementary benefit or" between the words "to" and "income support". Without such express words there would seem to me a strong case for saying that the legislature never intended regulation 51(1) to embrace deprivations for the purposes of securing entitlement to supplementary benefit.

Mr. Shrimpton further argued that, if regulation 51(1) was to apply in the present instance, it would be operating retrospectively, and it was well established that legislation never operated retrospectively unless there were clear words to that effect, or unless the matter were purely procedural. He cited the dictum of Lord Brightman, in the Privy Council case of Yew Bon Tew v. Kenderaan Bas Mara (PC) [1983] AC at page 558:

"Apart from the provisions of the interpretation statutes, there is at common law a prima facie rule of construction that a statute should not be interpreted retrospectively so as to impair an existing right or obligation unless that result is unavoidable on the language used. A statute is retrospective if it takes away or impairs a vested right acquired under existing laws or creates a new obligation or imposes a new duty, or attaches a new disability, in regard to events already passed [my emphasis]. There is, however, said to be an exception in the case of a statute which is purely procedural, because no person has a vested right in any particular course of procedure, but only a right to prosecute or defend a suit according to the rules for the conduct of an action for the time being prescribed."

Mr. Shrimpton contended that, in the present instance, the "events already passed" were the deprivation that took place in November/December 1987, and the disability imposed by regulation 51(1) was a new disability impinging on such events. I disagree. Regulation 51(1) was not a new disability. It came into existence with the income support legislation. The income support legislation conferred benefits, and regulation 51(1) posed in effect a restriction on such benefits. This was not a case where, after income support had come with its concomitant benefits into operation, regulation 51(1) was subsequently brought into existence operating in response to events which had previously taken place.

But in any event, the Court of Appeal in Secretary of State for Social Security and Another v. Tunnicliffe [1991] 2 All ER 712 [R(G) 4/91] has stated that a new provision may operate retrospectively, even in the absence of clear words requiring it so to do, where it would not be unfair for this to happen. Mustill LJ said at page 720:

"In these circumstances one has here a section which on any view has, and must have been intended to have, some retrospective effect. As to the aspects of the regime now in controversy, it is true that if the Secretary of State is right they depend to some extent on things which happened before the appointed day. But this is not fatal to the argument (see R v. Inhabitants of St. Mary, Whitechapel [1848] 12 QB 120 at 127, 116 ER 811 at 814 per Lord Denman CJ). True, there may be a presumption against allowing the statute to operate on conduct of the beneficiary before the new standard of conduct was set. But the force of the presumption is not invariable, and it must in my view be fixed by reference to the unfairness which would stem from giving the statute a retrospective effect. Bearing in mind that we are concerned here with a claim to recover money to which Mrs. Tunnicliffe was not entitled and which she wishes to keep, the presumption must be weak and, if one looks at s. 53 in isolation from s. 119, is in my view clearly rebutted by the opening words of the section."

Mr. Butt argued that it was likewise not unfair to apply regulation 51(1) retrospectively. Had supplementary benefit still been in existence, the claimant would not have succeeded in claiming that benefit. He should be in no better a position now that supplementary benefit had been replaced by income support. I agree with Mr. Butt's submission that there is nothing to prevent regulation 51(1) operating retrospectively if its provisions are relevant to the facts in question. But are they?

The real problem in this case would seem to me to be the fact that, at the time the claimant divested himself of the relevant property, income support did not exist. It is difficult to see how a person could deprive himself of property for the purposes of obtaining income support, if such benefit was at that time non-existent. The Social Security Act 1986, which was enacted on 25 July 1986, set out the essential features of a scheme for income support. It provided that the details would be contained in prescribed regulations, and in this connection the principal regulations were the Income Support (General) Regulations 1987. However those regulations did not come into force until 11 April 1988. The learned Commissioner in CIS/259/1990 endeavoured to meet the difficulty inherent in the fact that at the date of deprivation (in that case April 1987) income support had not come into existence by reliance on the fact that the Social Security Act 1986 had already been enacted and regulations made thereunder, notwithstanding they had not at the relevant time come into force. She said at paragraph 16:

"Mr. Underwood's submission that it was impossible for the claimant to have any knowledge of income support as a means-tested benefit is based on the false proposition that the Social Security Act 1986 was not already law at the date of deprivation. The date on which the prescribed scheme came into force is not material."

17. I regret that I must disagree with this approach of the learned Commissioner. In my judgment, the date on which the prescribed scheme came into force is very much material. Unless and until the scheme took effect, it was non-existent. It was

always open to the Government to change their views and never introduce the scheme at all; it was always possible that the Government might fall and be replaced by another Government of a different political persuasion with different attitudes towards social security legislation. Mr. Shrimpton, in support of this view, drew to my attention the case of Croxford v. Universal Insurance Company [1936] 2 KB p. 253. Where it was held that an insurance company could not rely on a particular provision of an Act which had received the Royal Assent until such provision had come into force. He pointed out what Slesser LJ said in that case at page 270:

"I must now refer to an observation made by Horridge J in the case of Croxford (1) on this point. Horridge J said this: 'in the case, however, the Act of Parliament was known, as it received the Royal Assent on July 31, 1934, and I cannot see why the defendant could not have taken proceedings under sub-s. 3 to obtain protection under that section'. With every respect to the learned judge, I cannot understand quite what the learned judge means by that sentence or what conclusion he intends to draw from it; but, in my opinion, it is impossible to say that for any purpose at all affecting the legal position between the parties s. 10 can be regarded as having any legal existence before the time that it is put into operation by the Minister under s 42 sub-s. 3, of the Act. Either s. 10 of this Act is part of the law or it is not, and it is clear to my mind that before January 1, 1935, the Road Traffic Act 1934, or at any rate such parts of it as the Minister had already brought into force by earlier Orders under s. 42, must be read as if s. 10 did not exist and, reading s. 10 as having no existence before January 1, 1935, important consequences arise in the present case."

It follows from this that, when the claimant in the present case divested himself of capital in November/December 1987, he simply could not have done it with the intention of obtaining income support because that was a benefit which, notwithstanding that the Royal Assent had been given to the Social Security Act 1986, at that time still did not exist. Nor, I think, could it be said that the description "income support" only meant the means-tested benefit which previously went under the name "supplementary benefit". The income support scheme is not the same as the supplementary benefit scheme. Although they have characteristics in common, including means-testing, they are in no sense identical. The benefits are differently calculated, and the income support scheme was drafted afresh as a wholly new scheme.

Accordingly, I think that the tribunal reached the right conclusion, albeit without adequate reasons to back it up. I consider that any divesting which took place prior to the coming into operation of the income support scheme could not result in the person concerned being caught by section 51(1). If the legislative had intended otherwise, express words to that effect would have been used. In consequence, the claimant in the present case was not disentitled to income support from statutory limit.

Accordingly, my decision is as set out in paragraph 1.

Date: 4 September 1992 (signed) Mr. D. G. Rice Commissioner