UK Social Security and Child Support Commissioners' Decisions

 


[2004] UKSSCSC CJSA_1395_2002 (04 May 2004)

DECISION OF THE SOCIAL SECURITY COMMISSIONER

1. The claimant's appeal to the Commissioner is allowed. The decision of the Middlesbrough appeal tribunal dated 20 November 2001 is erroneous in point of law, for the reasons given below, and I set it aside. The case is referred to a differently constituted appeal tribunal for determination in accordance with the directions in paragraphs 21 to 24 below. The attention of the Secretary of State is drawn to the direction in paragraph 21 below.
2. The appeal tribunal was concerned with the claim for jobseeker's allowance (JSA) treated as made on 25 June 2001. The claim so far as it related to income-based JSA was disallowed on 9 July 2001 on the ground that the claimant was to be treated as possessing capital of £20,427.66, in excess of the statutory limit of £8,000. This capital was said to stem from the receipt by the claimant of £42,000 as the proceeds of sale of a house left to her, and to her alone, by her grandmother. The claimant was receiving income-based JSA at the time and her entitlement was brought to an end on 10 December 1997. She made a further claim for JSA, including income-based JSA, on 11 June 1998. At that date the claimant said, and it was accepted, that she had capital of £2,690 in bank and building society accounts. The claimant had been living off her savings, but also gave detailed information about how she had disposed of the capital she had received. The adjudication officer determined that the claimant should be treated as also possessing notional capital of £22,300 on the ground that expenditure of that total amount was a deprivation of capital for the purpose of securing entitlement to income-based JSA or income support (Jobseeker's Allowance Regulations 1996, regulation 113(1)).
3. It appears from enquiries made at the oral hearing on 26 April 2004 that the claimant did not have a sufficient contribution record to qualify for contribution-based JSA on the claim made on 25 June 2001. It appears that the position was the same in relation to the claim made on 11 June 1998. However, on some intervening claims and claims subsequent to 25 June 2001 there may have been entitlement to contribution-based JSA. The claimant is a supply teacher and has recurring periods of work and of no work, the latter naturally occurring most frequently in school holiday periods. Further claims are recorded on 20 January 1999, 7 June 1999, 15 November 1999, 19 April 2000, 10 July 2000 and 6 April 2001. In each case entitlement to income-based JSA was disallowed on the ground of the possession of notional capital in excess of £8,000, after what seems to have been a proper application of the diminishing notional capital principle. Appeals against the decision on the claim of 11 June 1998 and the first five of the further claims were dismissed and an appeal against the decision on the claim of 6 April 2001 was pending on 20 November 2001. Subsequently, Commissioners allowed appeals against the appeal tribunal decisions on the claims of 19 April 2000 and 6 April 2001. The appeal tribunal hearing the remitted appeals on those claims decided entirely in the claimant's favour on 6 June 2003, finding that she had not deprived herself of any capital for the purpose of securing entitlement to income-based JSA. I shall come back below to the implications of those decisions.
4. On the claimant's appeal against the decision of 9 July 2001, the Secretary of State's submission set out the history of claims and decisions, but firmly made the point that the appeal tribunal was not bound by any previous decisions and should look at the issue of intentional deprivation afresh. The evidence put forward with the submission consisted of copies of a record of an interview with the claimant on 16 June 1998, of the claimant's list of items of expenditure and of a letter of 23 January 1999, written in connection with an earlier appeal, in which the claimant gave a further explanation of the circumstances.
5. The officer's record of the interview on 16 June 1998 briefly mentioned the history of the claimant's grandmother having changed her will, out of spite, to make the claimant the sole beneficiary. On the items later said to give rise to notional capital, the officer recorded payments of £10,000 to the claimant's mother, brother and sister "to keep the peace"; of £1,000 each to three children of whom she regarded herself as "aunt by proxy"; of £4,000 for a holiday in China "as a promise to her grandmother"; and of £4,200 to purchase jewellery as a keepsake of her grandfather, who had left £2,000 (or possibly £1,000) for his wife to put in trust for the claimant, which had not been done. The holiday in China was to take place in September 1998, but payment had already been made. There were also smaller amounts of £600 for a holiday for the claimant in Poland in March 1998 and £500 for a trip to Euro Disney by a nephew in April 1998.
6. The letter of 23 January 1999 said that the claimant's grandmother had changed her will to make the claimant sole beneficiary five years before her death, primarily to spite the rest of the family and to cause as much trouble as possible. The claimant said that her mother had had to leave school at 14 to work, instead of pursuing a career as a physiotherapist, to pay the mortgage after the claimant's grandfather had been injured in a traffic accident. She said that, as they were a close family, she did not feel it was unreasonable to give money to her mother, brother and sister, as in the original will all were major beneficiaries. The claimant also said that the holiday to China had originally been a gift her from her grandmother for looking after her and the plan had been for the costs to come out of the proceeds of sale of her grandmother's house after she had moved into a nursing home. Other further details were given, including that the trip to Poland was taken after medical advice that she needed a break after caring for her grandmother and mother.
7. In a written submission to the appeal tribunal the claimant said:

"I still believe that I repaid the money that I owed to my family, this may not have been a legal debt, but I feel it was a moral one, and therefore a matter of conscience. The family supported my research work, and helped pay the vets' bills for my little dog, who died a week before the first appeal."

She also said that she had been ill in the early part of 1998, had sold the jewellery to buy a computer system and that arrangements had already been made to sell her grandmother's house before she died (so the estate was settled within five weeks of her death). The trip to China was to have been paid for out of the proceeds, and was postponed due to the grandmother's death. She also referred to two Commissioners' decisions and to the sort of expenditure (holiday and buying a car) accepted as reasonable by the Department in those cases.

8. At the hearing on 20 November 2001 the claimant relied on her written submission, but added that she had followed her grandmother's wishes and that she morally owed the money to her family. The appeal tribunal dismissed the appeal. Its statement of reasons included the following:

"12. She contended that the payment of the £10,000 to her parents, brothers and sisters, though not made under a legal obligation was the repayment of a moral debt and to repay some vets bills to her brother. She also believed that her grandmother had intended to change her will to provide for all the members of the family, and she was merely rectifying the failure by her grandmother to actually do so.

24. The Tribunal do not consider that the payments amounting to some £10,000 were necessary as there was no legally enforceable debt to any member of [her] family and as an educated lady already with experience of the benefit system, will have known of the effects of possession of actual capital would have had [on] her claim to income based Jobseeker's Allowance. The Tribunal can only conclude, on a balance of probabilities, that the payments were made for the significant operative purpose of securing entitlement to income based Jobseeker's Allowance.

25. Again, in taking the holiday to China the appellant exercised choice in the disposal of a sum of £4,000 as she did with the jewellery, and as stated above, the payments of £1,000 to 3 children and the two further holidays significantly reduced her actual capital in an unnecessary manner."

9. The claimant now appeals against that decision with leave granted by Mr Commissioner Bano on 25 July 2002, after an earlier refusal of leave had been set aside. There was a reference to one of the other successful appeals to a Commissioner and to the statement in Commissioner's decision R(SB) 9/91 that for the intentional deprivation rules to apply a positive intention to secure benefit has to be shown. The appeal was not supported in the submission on behalf of the Secretary of State dated 12 August 2002. Unfortunately, after the claimant had replied to that submission, the file went astray in some way. Mr Commissioner Bano granted the claimant's request for an oral hearing in June 2003. The case was then transferred to Mr Commissioner Williams, who had dealt with the claimant's other appeals. A good deal of time was then spent in trying to obtain details of the claimant's other appeals, especially after her success before the appeal tribunal of 6 June 2003. Mr Commissioner Williams finally directed on 4 March 2004 that an oral hearing was to take place.
10. The oral hearing was at Doncaster County Court on 26 April 2004. The claimant was present and the Secretary of State was represented by Ms Deborah Haywood of the Office of the Solicitor to the Department for Work and Pensions. I am grateful to both for helpful submissions.
11. Ms Haywood submitted that, although the Secretary of State was in general neutral on questions of intentional deprivation of capital, the appeal tribunal in the present case had reached a conclusion which it was entitled to reach after making a judgment on all the evidence and had adequately explained its reasons. She submitted that paragraph 12 of the statement of reasons showed that the appeal tribunal had the claimant's case on the existence of a moral obligation in mind and that it could not have been reasonably expected to unpack its conclusion against the claimant's case any further. Ms Haywood also told me that the Secretary of State had not made any application for leave to appeal against the decisions of the appeal tribunal of 6 June 2003 and had no plans to challenge those decisions. I reject the Secretary of State's submissions.
12. In my view, nothing said in R(SB) 9/91 adds much to the claimant's case. It is true that in paragraph 8 of that decision Mr Commissioner Rice stated that a positive intention (his emphasis) to secure benefit had to be shown, but that was to support the proposition that it was not enough merely to say that the natural consequence of a transaction was to secure benefit. When he went on to substitute his own decision on the appeal, his reasoning was that in the light of what the claimant there must have realised at the time of the transaction in question, no other conclusion could be reached on the balance of probabilities than that the claimant's purpose was partly to claim supplementary benefit. The claimant there had been in receipt of supplementary benefit while living in her own home. She suffered a stroke and had to go into hospital and then a nursing home. She transferred her former home to her two daughters as she had left the house to them in her will and wished to give it to them in her lifetime. It was argued that that was her sole purpose. Mr Commissioner Rice noted that the evidence put forward omitted the important question of what the claimant thought she would live on in the nursing home if she gave away the former home and the proceeds of its sale. He reasoned that she must have realised from her experience of the system that she could not receive supplementary benefit while in possession of the house or its proceeds of sale, so that the intention to secure benefit had to be attributed to her. R(SB) 9/91 thus endorses the attribution of an intention to a claimant by implication from all the circumstances. It merely requires that the reasoned conclusion be in terms of the claimant's intention or purpose, not in terms of the natural consequences of the transaction in question.
13. That approach might seem to support the appeal tribunal's decision, but there was a crucial gap in its stated reasoning. The appeal tribunal mentioned, without expressly rejecting, the claimant's argument that she was under a moral obligation to make the payments, but that argument did not figure at all in paragraph 24 of the statement of reasons. The reasoning there was that, because there was no legally enforceable debt of £10,000 and the claimant did (as is not disputed) know of the rule that the possession of actual capital over £8,000 precluded entitlement to income-based JSA, it could only be concluded on the balance of probabilities that securing entitlement was a significant operative purpose of making the payments. And in paragraph 25 the appeal tribunal appears to consider it conclusive that the claimant had a choice whether to make payments or not.
14. The appeal tribunal (and the Secretary of State in the written submission to the appeal tribunal) seems to have misunderstood the effect of R(SB) 9/91 and of another decision of Mr Commissioner Rice, R(SB) 12/91. In R(SB) 12/91 he held that if a claimant has a legally enforceable debt that is immediately repayable, the payment of the debt cannot be regarded as within the provision on intentional deprivation of capital for the purpose of securing entitlement to benefit. A person has no choice but to pay his or her debts. But it does not follow that, if a claimant does have a choice (eg if a debt is not legally enforceable or is not immediately repayable) and knows of the actual capital rules, it must be concluded that securing benefit was a significant operative purpose. What Mr Commissioner Rice in fact said in paragraph 14 of R(SB) 12/91 was that in such circumstances "the question will arise" of whether the securing of benefit or an increased amount was a significant operative purpose. It is plainly accepted by R(SB) 12/91 and many other Commissioners' decisions (including R(SB) 40/85, CIS/2627/1995 (specifically relied on by the claimant), CIS/40/1989 and R(IS) 15/96) that, if a claimant has a choice, that does not necessarily preclude a conclusion that the securing of benefit or increased benefit is not a significant operative purpose at all. That possibility was one which appeal tribunal in the present case appeared to consider was not open, so that it did not address the question that properly arose. That was an error of law.
15. There was a real practical question left unanswered by the appeal tribunal, not just a technical gap in stated reasoning which might not on its own justify setting aside the decision. The claimant in the first half of 1998, when the expenditure occurred, was not a person with no foreseeable means of support other than her inheritance or income-based JSA or some other income-related benefit. She had an established career as a supply teacher. Although she might have been incapable of work through illness for some of 1998 and periods of employment might be interspersed with periods of no employment and claims for JSA, she had a relatively steady source of support. She could also have reasonably expected, through the payment of contributions, to build up at least occasional entitlement to contribution-based JSA. Capital is irrelevant to entitlement to contribution-based JSA and such entitlement would be offset against any entitlement to income-based JSA. The claimant also expressed herself in terms of moral obligation, to her grandmother to carry out what she felt were her real wishes and to other members of the family to treat them in a way she felt fair, with the suggestion (although the question does not seem to have been put to her specifically) that she would have made the payments she did even if there were no question of her being able to qualify for income-based JSA. Those circumstances raised a case for the claimant having disposed of capital, or at least some of it, for purposes which did not include securing entitlement to income-based JSA or increasing the amount. Commissioners have accepted (see in particular CIS/40/1989) the potential validity of such a case in similar circumstances. The appeal tribunal erred in law in not dealing expressly with that case.
16. There is a further error of law in relation to the expenditure on jewellery, which I regret was not raised at the oral hearing. In the appeals heard by the appeal tribunal on 6

June 2003, the claimant was found only to have spent £2,695 on jewellery, but so far as the appeal tribunal of 20 November 2001 was concerned the undisputed evidence was that the claimant had spent £4,200. The proper analysis, if it was concluded that the purchase had been partly with the intention of reducing capital to secure entitlement to or an increase in benefit, would then have been that the current market value of the jewellery, less any expenses of sale, should have formed part of the claimant's actual capital. The disregard of the value of personal possessions in paragraph 15 of Schedule 8 to the JSA Regulations does not apply in those circumstances. Then the claimant would be treated as having notional capital, through the operation of the deprivation rule, of the difference as at the date of the deprivation between the amount spent on the jewellery and the amount counted as actual capital (see Commissioner's decision CIS/494/1990, as qualified in CIS/2208/2003, to be reported as R(IS) 8/04). As the claimant's evidence was that she had subsequently disposed of the jewellery to buy a computer system, the appeal tribunal should have considered the effect of that transaction on her actual capital and whether any new occasion of intentional deprivation of capital arose.

17. The claimant's moral obligation argument applied most strongly to the payment of £10,000 to her mother, brother and sister. If that amount were taken out of notional capital, together with the £4,200 for the jewellery because of the doubts expressed above, that would leave a figure for notional capital in June 1998 of just over £8,000. In addition, since the claimant had capital in cash of only £2,690 when she claimed on 11 June 1998 and the total expenditure accounted for in items either accepted or not accepted initially by the Secretary of State was some £44,700, there would have to be a question over whether some of the later items of expenditure could have been for the purpose of securing entitlement to income-based JSA. Once the level of the claimant's actual capital fell below £8,000, the attribution of a purpose to secure benefit or to increase its amount becomes more complicated.
18. For all those reasons, the appeal tribunal's decision is erroneous in point of law and cannot be supported on the basis that there were proper findings and conclusions about enough notional capital remaining on 25 June 2001 to exclude the claimant from entitlement to income-based JSA. The decision must therefore be set aside.
19. I have considered whether I am in a position to substitute a decision on the claimant's appeal against the decision of 9 July 2001, but have come down against taking that course. The claimant gave some further evidence at the oral hearing and provided some further documents which had not formerly featured in this particular appeal. But there was not detailed discussion on every element of the expenditure said to have given rise to notional capital. In the light of the claimant's complete success on all elements of that expenditure at the appeal tribunal of 6 June 2003, the claimant should have the opportunity of arguing for the same result in her appeal against the decision of 9 July 2001. Although I could take account to some extent of the reasoning of the appeal tribunal of 6 June 2003 (without being bound in any way), I am afraid that the statement of reasons of that appeal tribunal does not really give any explanation of the result in relation to the different kinds of expenditure concerned. Sending the case for rehearing has the advantage that it gives the Secretary of State the opportunity of considering the matters mentioned in paragraph 21 below.
20. I therefore refer the claimant's appeal against the decision of 9 July 2001 to a differently constituted appeal tribunal for determination in accordance with the following directions.
21. I direct that the Secretary of State should immediately on receipt of this decision give consideration to whether or not to exercise the power in regulation 3(4A) of the Decisions and Appeals Regulations to revise at any time an original decision (ie that of 9 July 2001) against which an appeal has been made, but not determined. The Secretary of State may (or may not) consider that, as he has not challenged the decision of the appeal tribunal of 6 June 2003 in relation to the claims made on 9 April 2000 and 6 April 2001, revision of the decision on the claim made on 25 June 2001 is appropriate on grounds of consistency. If there is a revision to the claimant's advantage under regulation 3(4A), the claimant's current appeal will lapse and she will acquire a fresh right of appeal against the decision of 9 July 2001 as revised (Decisions and Appeals Regulations, regulations 30 and 31).
22. If there is no revision following consideration under paragraph 21, there must be a complete rehearing of the claimant's current appeal against the decision of 9 July 2001 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 20 November 2001. The evidence will include the four letters handed in by the claimant at the oral hearing and marked "26.4.2004 A - D". The new appeal tribunal must follow the legal approach set out in paragraphs 12 to 17 above.
23. At the oral hearing there was some discussion of the doctrine of secret trusts, under which a person who takes an absolute interest under a will or on intestacy can be found to hold the interest on trust to carry out purposes communicated by the deceased. This stemmed from the claimant's evidence at the hearing of a conversation with her grandmother about a week before she died in which her grandmother said words to the effect of "You will do the right thing with the house, won't you". It may be that the new appeal tribunal will have to consider the issue of secret trusts. However, after the further investigation which I said at the oral hearing that I would carry out, it seems to me that words like those quoted above would not define the trusts to be carried out with sufficient certainty to create any trust obligation and that one could not find the necessary implied agreement by the claimant to carry out defined trusts in reliance on which her grandmother failed to revoke her existing will and make a new one. I have therefore not sought any further submissions at this stage. I direct the new appeal tribunal that it need not consider the effect of the doctrine of trusts unless the claimant expressly relies on it or puts forward some further evidence which the new appeal tribunal considers makes this a live issue.
24. The evaluation of all the evidence will be entirely a matter for the judgment of the new appeal tribunal, independent of whatever decisions have been made in relation to other claims for income-based JSA for other periods.

(Signed) J Mesher

Commissioner

Date: 4 May 2004