Secretary of State for Work and Pensions v. Hourigan  UKSSCSC CIS_5906_1999 (19 December 2002)
(Secretary of State for Work and Pensions v. Hourigan  EWCA Civ 1890)
CA (Brooke, Sedley and Auld LJJ) CIS/5906/1999
Capital – tenants in common owning property in unequal shares – whether to be regarded as holding equal shares
The claimant and her son bought her home (which in 1993 was worth £27,000) from the local authority, contributing one sixth and five sixths respectively to the total purchase price. In March 1993 the claimant moved to a residential home, and in June 1993 her income support was terminated on the grounds that she possessed capital in excess of £8000, as a result of her being deemed under regulation 52 of the Income Support (General) Regulations 1997 to be the beneficial owner of half of the house. That decision was appealed against. In August 1997 the claimant died, and her son, who at all material times was her appointee, continued the appeal. In June 1998 the social security appeal tribunal held that the deceased claimant had an equal half-share in the value of the house and therefore did not qualify for income support. In October 2001 the Commissioner allowed an appeal from that decision, substituting a determination that at all material times the value of her capital was less than £8000. The Secretary of State appealed to the Court of Appeal.
Held, dismissing the appeal, that:
- (per Brooke LJ) the critical words in regulation 52 for interpretation on the appeal are
" … where a claimant and one or more persons are beneficially entitled in possession to any capital asset … "; the language of regulation 52 lends itself naturally to a situation in which two or more people are jointly entitled to the equitable interest in the same capital asset, in which case they do not each possess a separate share in the equitable interest, but are jointly vested with the whole of that interest; in that case, the natural reading of regulation 52 is therefore to treat that unity as severed and to treat the claimant as if he/she was entitled to an equal share (with the others) of the whole beneficial interest; the claimant is then treated as possessing capital which he or she does not in fact possess (such result being permitted by section 136(5)(b) of the Social Security Contributions and Benefits Act 1992) (paragraph 16);
- however, with tenancies in common, there is no need to treat a claimant's unity of interest as if it had been severed for the purpose of computing fairly the capital he/she owns for the purposes of Part VII of the 1992 Act; a beneficial interest which a claimant owns as a tenant in common is an asset separately disposable by him or her in both English and Scots law (paragraph 17);
- on the facts of the present case, the son's five sixths beneficial interest in his mother's house and his mother's one sixth interest represented separate capital assets of which each was free to dispose; it would therefore be misuse of language to say that the two of them were beneficially entitled to the house within the meaning of regulation 52: they were not (paragraph 18);
- the interpretation of regulation 52 in CIS/3283/1997 where it was stated that the application of the regulation may inescapably result in a claimant being regarded as possessing a greater share than in fact he did, was not inevitable (paragraphs 22 and 23);
- (per Sedley LJ) the current form of regulation 52 does not even meet the purpose of administrative convenience argued for by the Secretary of State (paragraph 27);
- the Secretary of State's suggested construction of the regulation does, however, replace the true share with a crude calculation which can be both a source of real unfairness and an incentive to create multiple shares, perhaps spuriously, in order to drive up the divisor and so drive down the imputed value of the claimant's interest (paragraph 28);
- in view of these considerations, the Secretary of State did not make out the breadth of meaning contended for and, the Court being left with the power granted by Parliament, that power would be read down (as the Commissioner had done) so as to protect the deceased claimant (paragraph 30);
Auld LJ agreed with the judgements of Brooke and Sedley LJJ.
DECISION OF THE COURT OF APPEAL
Ms. N. Lieven (instructed by the Solicitor to the Department for Work and Pensions) appeared for the Appellant.
Mr. J. Howell QC and Ms. K. Gallafent (instructed by the Child Poverty Action Group) appeared for the Respondent.
LORD JUSTICE BROOKE:
"(1) A person in Great Britain is entitled to income support if––
(a) he is of or over the age of 16;
(b) he has no income or his income does not exceed the applicable amount;
(c) he is not engaged in remunerative work …
(4) … where a person is entitled to income support, then—
(a) if he has no income, the amount shall be the applicable amount; and
(b) if he has income, the amount shall be the difference between his income and the applicable amount."
"No person shall be entitled to an income related benefit if his capital or a prescribed part of it exceeds the prescribed amount."
"The applicable amount, in relation to any income-related benefit, shall be such amount or the aggregate of such amounts as may be prescribed in relation to that benefit."
"(2) Regulations may provide that capital not exceeding the amount prescribed under section 134(1) above but exceeding a prescribed lower limit, shall be treated, to a prescribed extent, as if it were income of a prescribed amount.
(3) Income and capital shall be calculated or estimated in such manner as may be prescribed.
(5) Circumstances may be prescribed in which––
(a) a person is to be treated as possessing capital or income which he does not possess;
(b) capital or income which a person does possess is to be disregarded."
"Capital which a claimant possesses in the United Kingdom shall be calculated––
(a) except in [the case of a National Savings Certificate], at its current market or surrender value, less
(i) where there would be expenses attributable to sale, 10 per cent;
(ii) the amount of any encumbrance secured on it."
"Except where a claimant possesses capital which is disregarded under regulation 51(4) (notional capital), where a claimant and one or more persons are beneficially entitled in possession to any capital asset they shall be treated as if each one of them were entitled in possession to the whole beneficial interest therein in an equal share, and the foregoing provisions of this Chapter shall apply for the purposes of calculating the amount of capital which the claimant is treated as possessing as if it were actual capital which the claimant does possess."
"where a claimant and one or more persons are beneficially entitled in possession to any capital asset they shall be treated as if each one of them were entitled in possession to the whole beneficial interest therein in an equal share." (Emphasis added)
It was common ground on the hearing of the appeal that the words "entitled in possession" were to be contrasted with "entitled in expectancy" or "entitled in reversion". They can therefore be ignored for the purposes of the problem we have been asked to resolve.
"22. Regulation 52 may only apply to require a person to be treated as if he is entitled in possession to an equal share of the whole beneficial interest when in fact he is not so entitled. The obvious case (if the regulation applies to a tenancy in common as the Secretary of State contends) is where individuals have different shares in the beneficial interest. For example, whether a claimant owned only 5% or 95% of the equitable interest, in either case he would be treated as owning 50% of the whole equitable interest if there is only one other person also beneficially entitled in possession to a share. But he would be treated as owning 33% if two others are involved; 25% if three other are; 20% if four other are; and so on. There is no rational reason in the context of income support why a claimant should be deemed to possess so much more than he actually has and no rational reason why, given the same actual share, the amount that the claimant is deemed to have should depend on the number of others with a share regardless of their actual interest. Indeed the latter would be a standing invitation to abuse. Nor is it rational, if the number of others involved may be relevant, for those who have an interest in the same equitable interest otherwise than beneficially in possession (such as those interested in it in reversion) to be ignored.
23 As Mr. Commissioner Howell observed [in CIS/7097/95], the result of the Secretary of State's interpretation would be to make the system 'a lottery; … producing arbitrary answers (on some facts unjustly in favour of claimants, on others against)' and that 'the injustice and absurdity' was 'obvious'."
LORD JUSTICE SEDLEY:
LORD JUSTICE AULD