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[1992] UKSSCSC CIS_578_1990 (14 January 1992)

R(IS) 9/92

Mr. D. G. Rice CIS/578/1990
14.1.92

Notional capital - deprivation of capital - whether tribunal obliged to explain that account would be taken of notional diminishment

The claimant sold a property on 18 December 1989 and received £19,000 proceeds. He made payments to his three sons totalling £13,756 in respect of alleged debts owed to them. The adjudication officer found that the claimant had, in fact, deprived himself of this sum for the purpose of securing entitlement to income support and that he should therefore be treated as possessing notional capital of £13,765 in accordance with regulation 51(1) of the Income Support (General) Regulations 1987. On appeal the tribunal upheld the decision. The claimant appealed to the Commissioner.

Held that:

from 1 October 1990 the formula in regulation 51A of the Income Support (General) Regulations applied to the calculation of notional capital and superseded the principles laid down in R(IS) 1/91 (para. 11);

bearing in mind that the claimant had declared that he had £4,000 actual capital, and the amount of notional capital was £13,756, the interval between the date of deprivation and the date of claim was so short that it was clear that the diminishing notional capital rule would not have reduced the claimant's capital below the statutory limit. It was therefore unnecessary for the tribunal to go into this matter (para. 8);

it was equally clear that the claimant's resources could not have fallen below the statutory limit by the date of the tribunal hearing; although it might have been helpful if it had done so, there was no obligation on the tribunal to point out that a time would come when the claimant's resources fell below the crucial figure. The onus was on the claimant, as and when he considered his resources fell below the statutory limit, to reapply for income support (para. 10).

DECISION OF THE SOCIAL SECURITY COMMISSIONER

For the reasons set out below, the decision of the social security appeal tribunal given on 22 June 1990 is not erroneous in point of law, and accordingly this appeal fails.

This is an appeal by the claimant, brought with the leave of the tribunal chairman, against the decision of the social security appeal tribunal of 22 June 1990.

On 13 February 1990 the claimant applied for income support, declaring his capital then to be £4,000. Inquiries were made, and it was established that he had on 18 December 1989 received for his interest in the sale of a house at 2 Cholmeley Place the sum of £19,000 less payments made to his three sons of £13,756. These payments were said to be in respect of debts due to the sons for having financed trips to Pakistan for the claimant's family in 1981, 1983 and 1987. However, the adjudication officer decided that the claimant should be treated as still in possession of the £13,756, having deprived himself of this sum for the purposes of securing entitlement to income support. The claimant was therefore to be treated as having capital in excess of the statutory limit, and was therefore not entitled to benefit from 13 February 1990. In due course, the claimant appealed to the tribunal who in the event upheld the adjudication officer.

The tribunal gave as reasons for their decision the following:

"[The claimant's] case depended upon his establishing that the reduction of £19,000 to £5,244 was bona fide because three of his sons had good claims to a total of £13,756. It was contended that the sons had met their parents and siblings' expenses in travelling to and living in Pakistan, for which they were entitled to repayment. We did not accept this contention, because

(1) there was no evidence of how this £13,756 was made up. We dismissed document A, since we found that UK living expenses even on supplementary benefit/income support levels, were no guide to living expenses in Pakistan;

(2) we dismissed documents B-D as produced for the purposes of the appeal and unverified by corroborated evidence or oral evidence by the makers;

(3) we dismissed document E since it gave no guide to the actual amounts paid by the family members travelling to Pakistan, between 1981 and 1988;

(4) we were not satisfied as to [the claimant's] veracity. He gave several inconsistent versions of the £5,000 paid on the sale of 1 Zinzan Street. [The claimant's] apparently total incomprehension of English was the more surprising in view of the three interviews, notes of which are in the AT2 bundle, dated in 1982, 1983, and 1986, in which there is no reference to an interpreter. He told us he had no recollection of the 1986 interview. He did not suggest that the interview was conducted wrongly in the absence of an interpreter. We made some allowance for possible confusion arising through inexpert translation, but on balance we were unable to believe [the claimant].

We inferred, therefore, that he instructed his solicitors to reduce the amount payable to him on the sale of 2 Cholmeley Place from £19,000 to £5,244 so as, deliberately, to reduce his apparent capital resources below the capital limit for income support entitlement; he had, within regulation 51 Income Support (General) Regulations deprived himself of capital for the purposes of securing such entitlement".

I see nothing wrong with the tribunal's decision.

In my judgment, the tribunal have gone into the matter with a commendable thoroughness, and have explained lucidly why they reached the conclusion they did. I see no grounds for my interfering with their decision.

However, the adjudication officer now concerned has suggested that the tribunal erred in point of law in not considering the principle of diminishing notional capital. He first contends, relying on R(IS) 1/91 as follows:

"7. The effect of [R(IS) 1/91] on the instant case is that the tribunal were empowered at the material time to consider the depletion of notional capital from the date of deprivation (apparently in December 89) and the date of the decision of 13 February 1990 to arrive at a notional amount of capital deemed to exist on that date. The addition of this amount to the declared actual capital will determine entitlement or otherwise to income support. Although the claimant was in receipt of income support for part of this period capital should not necessarily diminish at this level according to R(IS) 1/91 and other reasonable expenses can be allowed".

The relevant passages from R(IS) 1/91, a decision of a tribunal of Commissioners, read as follows:

"16. Nevertheless we consider that in fact the same result (i.e. the application of a rule analogous to the diminishing capital rule) is arrived at on general principles. This arises simply from the provision of regulation 51(6) that, when calculating the amount of notional capital it must be calculated 'as if it were actual capital which [the claimant] does possess'. If a claimant in fact had actual capital of a sum of money and at the time of a first claim this exceeded the prescribed amount (£6,000 at the relevant time) then he would not be entitled to income support. However, if after reasonable expenditure on living and other sensible expenses (which we do not consider need to be limited to the relevant amount of income support, a point which Mr. Butt conceded at the hearing), the claimant's actual capital became reduced to below the limit of £6,000, then there is no doubt that the claimant would then be entitled to income support. In our judgment regulation 51(6) envisages that precisely the same situation should occur if what the claimant has initially is not actual capital but notional capital. Just as under regulation 51(1) the claimant is treated as still possessing such capital so he is also entitled in our view under regulation 51(6) to be deemed to diminish that capital by reason of expenditure related to his own particular financial and other circumstances (not necessarily the same as the amount of income support that he would receive). When such notional expenditure from his notional capital has reduced the notional sum to below the prescribed limit (then £6,000, now £8,000) then the claimant would be entitled to reclaim income support and this particular bar on entitlement to that benefit would have ceased to exist".

Quite clearly, bearing in mind that the claimant had declared that he had £4,000 actual capital, and the amount of notional capital was £13,756, the diminishing notional capital rule, as explained by the tribunal of Commissioners in R(IS) 1/91, would not in the short period between December 1989 and 13 February 1990 reduce the claimant's total resources, actual and notional, below the statutory limit of £6,000. Accordingly it was unnecessary for the tribunal to go into this matter.

The adjudication officer now concerned went on to submit as follows:

"I further submit that within the terms of paragraph 9 of R(SB) 22/83 the tribunal should have considered diminution of total capital between 13 February 1990 and the date of their decision at 22 June 1990, and given the claimant some indication that a date could be reached when the capital reduced to below the relevant capital limit which was £8,000 from 9 April 1990 R(IS) 1/91".

I also reject that submission.

Just as clearly the claimant's total resources could not have fallen below the statutory limit between December and 13 February 1990, likewise they could not have fallen below that figure by 22 June 1990. Moreover, although it might have been helpful if the tribunal had pointed out that a time would come when the claimant's resources fell below the crucial figure, there was no obligation on them so to do. It was up to the claimant, as and when he considered that his resources fell below the statutory limit, to inform the adjudication officer and reapply for income support. Accordingly, I see nothing in the two submissions of the adjudication officer now concerned.

However, before I leave this matter, I consider that I should deal with a further issue which arises in this case. Although a tribunal of Commissioners laid down in R(IS) 1/91 the principle of how the diminishing notional capital rule should apply, since 1 October 1990 a statutory formula has applied. It is set out in regulation 51A of the Income Support (General) Regulations 1987. The provisions are complex, but the general effect is that the amount of notional capital fixed by regulation 51(1) shall be reduced each week by the amount of income support he would have received if the notional capital had not been above the maximum, together with a proportion of rent and 80% of community charge not met by housing benefit or community charge benefit. What is the effect of that statutory provision on the decision contained in R(IS) 1/91? In my judgment, although the principles laid down in that decision operate until the coming into effect of regulation 51A on 1 October 1990, thereafter the only formula that can be adopted is that contained in regulation 51A. The tribunal of Commissioners, as is apparent from the opening remarks contained in paragraph 16 of their decision, had to consider the matter on general principles without any express statutory provision setting out an appropriate formula. They therefore prescribed that the appropriate criteria were "reasonable expenditure on living and other sensible expenses (which we do not consider need be limited to the relevant amount of income support ...)." These could easily be more extensive than the concession contained in regulation 51A, but, in my judgment, the effect of the introduction of regulation 51A is to impose a new formula which from 1 October 1990 supersedes the principles laid down in R(IS) 1/91.

Accordingly, the notional capital has to be calculated up to and including 30 September 1990 in accordance with R(IS) 1/91, but from 1 October 1990 onwards the notional capital carried forward from 30 September 1990 and calculated as at that date has to be reduced in accordance with the formula prescribed by regulation 51A.

For the reasons set out above I dismiss this appeal.

Date: 14 January 1992 (signed) Mr. D. G. Rice
Commissioner