UK Social Security and Child Support Commissioners' Decisions

[2003] UKSSCSC CIS_3268_2002 (27 January 2003)

 


DECISION OF THE SOCIAL SECURITY COMMISSIONER

1. The claimant's appeal to the Commissioner is allowed. The decision of the Bolton appeal tribunal dated 31 May 2002 is erroneous in point of law, for the reason given below, and I set it aside. The case is referred to a differently constituted appeal tribunal for determination in accordance with the directions given in paragraph 14 below (Social Security Act 1998, section 14(8)(b)).
2. This appeal, made with my leave, is supported by the representative of the Secretary of State in the submission dated 1 October 2002. The claimant's representative had no comment to make on that submission. In the circumstances there is no need to go into the circumstances of the case in any great detail, but I should give reasons for my decision, as the submission of 1 October 2002 included one particular question of law which needs some extended consideration.
3. The appeal tribunal was concerned with the claim for income support apparently treated as made on 16 October 2001. The claimant was then aged 60. On the claim form signed on 23 November 2001 he declared that he had savings of £10,430. He also said that:

"as stated on a previous application I sold my house and had the half-share of £22,133.60. After my daughter receiving a share (which was agreed prior to the death of her mother in 1992) and moving house twice, also using it for living expenses and refurnishing my new home, I am left with the above sum."

Evidence was produced of the sale of the claimant's former home in Morecambe on 30 October 2000, and of the sending of a cheque for £22,133.60 on 1 November 2000. Copies of various bank and building society statements were produced. The decision-maker took the view that none of the statements showed a paying-in of the £22,133.60 and that the claimant had not proved that had ceased to possess any part of that sum. Accordingly, on 9 January 2002 the claim was disallowed on the ground that he had not shown that his capital resources were less than the prescribed amount of £12,000.

4. The claimant appealed, saying that his capital amounted only to £6,000. The Secretary of State's written submission mentioned the relevance of regulation 51(1) of the Income Support (General) Regulations 1987 if it was accepted that the claimant had disposed of any of the £22,133.60. At the hearing before the appeal tribunal, statements of a Nationwide Building Society account were produced showing the payment in of a cheque for £22,133.60 on 1 November 2000 and, amongst other withdrawals, one of £9,747.35 on 20 December 2000 which he said represented the payment to his daughter. There was also a statement from the claimant's daughter of what the rest of the money had been spent on. The claimant attended the hearing with his representative, Mr Richard Wilkinson of Bolton Metro Welfare Rights Service. Among the points made was that the claimant had been entitled to income support in Morecambe before his house was sold and he moved to Lancaster.
5. The appeal tribunal disallowed the appeal. The final two paragraphs of the statement of reasons were as follows:

"On the evidence, the Tribunal find that there was no valid agreement whereby the Appellant was either legally or morally obliged to pay money to his daughter and the inescapable inference was that the disposal was intended to facilitate the appellant claiming benefit.

As a result he is to be treated as being in possession of the sum of £9,747.35 in addition to his other capital. His total capital, therefore, exceeds £12,000 and he is, therefore, not entitled to benefit."

6. When granting the claimant leave to appeal I said the following:

"It is arguable that the appeal tribunal erred in law in failing to make the necessary findings of fact, eg on the claimant's knowledge of the capital rules for income support, on which to base its conclusion that his transfer of £9,747.35 to his daughter was "intended to facilitate [the claimant] claiming benefit". Did the appeal tribunal apply the proper principle as to significant operative purpose under regulation 51(1) of the Income Support (General) Regulations 1987? In addition, if the amount transferred was to be treated as notional capital under regulation 51(1), should the appeal tribunal have considered the effect of the diminishing notional capital principle for the period from 20 December 2000 to the date of claim for income support (16 October 2001) or the date of decision (9 January 2002)?. If the rule in regulation 51A does not start to apply until the date of the claim for income support, should the principle laid down by the Tribunal of Commissioners in R(IS) 1/91 be applied for the period from 20 December 2000 down to the date of claim?"

7. In the submission of 1 October 2002 the representative of the Secretary of State agreed that the appeal tribunal, having apparently accepted that the claimant had disposed of actual capital (at least the £9,747.35), failed to make the necessary findings of fact to support a conclusion that he had deprived himself of the capital for the purpose of securing entitlement to income support. There was no consideration of the claimant's knowledge of the capital rules or of the other factors relevant to the issue of whether the obtaining of benefit was a "significant operative purpose" at the time (see, for example, Commissioners' decisions R(SB) 38/85, R(SB) 40/85, R(SB) 9/91 and R(SB) 12/91). I now conclude that the appeal tribunal did err in law in that way. There was also I think an inadequate analysis of what actual capital the appeal tribunal considered the claimant still had on 16 October 2001 and what it accepted had been spent or disposed of for what purposes. As will emerge below, that is necessary as a preliminary to sorting out the very difficult relationship between actual capital and notional capital under regulation 51(1).
8. Before giving my formal decision with directions I need to explore that issue. Paragraph 9 of the Secretary of State's submission of 1 October 2002 was as follows:

"Regulation 51A provides a formula for the calculation of the reduction of notional capital, once notional capital is fixed under regulation 51(1). It does not provide for the reduction of notional [capital] prior to the date of the claim to benefit. The Commissioner in his direction has enquired if the principle laid down in R(IS) 1/91 by the Tribunal of Commissioners should be applied for the period from 20 December 2000 to the date of claim, however the Tribunal of Commissioners [in fact it was an individual Commissioner] in R(IS) 9/92 held that `from 1 October 1990 the formula in regulation 51A of the Income Support (General) Regulations applied to the calculation of notion capital and superseded the principles laid down in R(IS) 1/91' (para 11). I therefore submit that the tribunal should not have applied the principle laid down in R(IS) 1/91."

9. I agree that the terms of regulation 51A, which I shall not set out here, have the effect that its particular rule only applies after the most recent week in which capital of the claimant has deprived himself is taken into account in calculating entitlement to income support. That would mean in the present case that regulation 51A could not start applying until the week after the benefit week in which 16 October 2001 fell. There seems at first sight to be an unfairness in not applying an equivalent diminishing notional capital rule to amounts which have, by reason of intentional deprivation, fallen into the category of notional capital at some date before a claim for income support is made. There are indeed many difficulties in working out just what the decisions in R(IS) 1/91 and R(IS) 9/92 stand for, and more difficulties the closer the examination of those decisions is. However, after careful (and, I am afraid, long drawn-out thought), I have concluded that talking of a diminishing notional capital rule is a red herring in many cases, including the present one.
10. There are two related reasons for that conclusion. The first is that expenses which could be taken into account in applying a diminishing notional capital rule will often already have been taken into account in calculating the amount of actual capital of which a claimant has deprived himself and which is caught by the rule in regulation 51(1). Thus, in the present case, the claimant received actual capital of £22,133.60 in November 2000. By 23 November 2001 he said that he only had actual capital of £10,430 left. Part of his explanation for what had been spent was to meet necessary living and household expenses to top up benefit (I think that he was in receipt of incapacity benefit for some periods) and during gaps in receipt of other benefit. Expenditure for such purposes would normally be accepted as not for the purpose of securing entitlement to income support, so that the amounts concerned would not form part of any notional capital under regulation 51(1). That was the view of the Tribunal of Commissioners in paragraph 16 of R(IS) 1/91, where it was pointed out that reasonable expenditure on living and other sensible expenses is not for the purposes of regulation 51(1) restricted to the relevant amount of income support. The introduction of regulation 51A does not impinge in any way on the operation of that principle. If such expenditure has been taken into account in calculating the amount of notional capital under regulation 51(1), there can be no justification for any further reduction of the amount of notional capital on the basis of the same expenditure.
11. The second reason, in some ways the other side of the coin of the first reason, is that there should not be double counting in relation to actual capital. In the present case, the claimant said that his actual capital as at 16 November 2001 was £10,430. One reason why his actual capital was at that level, rather than at a higher level, was that he had spent actual capital on living and household expenses. Since the expenditure had been taken into account in that way, there could be no justification for making any further deduction from an amount of notional capital otherwise properly calculated, on the basis of the same expenditure.
12. Thus, it seems to me now that the potential problem about which I was worried when I gave the direction on 5 September 2002 is in practice removed in most cases by the operation of the principles stated above. There might perhaps be a problem where a claimant deprives himself of the entire amount of his actual capital in one transaction and then does not claim income support for some time. However, those are far from the circumstances of the present case and can be dealt with when and if such a case arises.
13. For the reason given in paragraph 7 above I set aside the decision of the appeal tribunal of 31 May 2002. The claimant's appeal against the decision dated 9 January 2002 is referred to a differently constituted appeal tribunal for determination in accordance with the following directions.
14. There must be a complete rehearing of the appeal on the evidence presented and submissions made to the new appeal tribunal, which will not be bound by any findings made or conclusions expressed by the appeal tribunal of 31 May 2002. The new appeal tribunal must take into account in particular what is said in paragraphs 7, 10 and 11 above in applying the well-established tests for whether or not regulation 51(1) of the Income Support (General) Regulations 1987 applies and, if so, to create what amount of notional capital. The new appeal tribunal must make careful findings of fact on all the issues relevant to those tests. The claimant and his representative may well wish to make some further submissions, with further evidence if relevant, on how the expenditure said to have been incurred by the claimant between November 2000 and November 2001 marries up with the receipts and withdrawals shown in the building society books currently in the papers. The evaluation of all the evidence will be entirely a matter for the judgment of the members of the new appeal tribunal. The decision on the facts in this case is still open.

(Signed) J Mesher

Commissioner

Date: 27 January 2003