UK Social Security and Child Support Commissioners' Decisions

[2006] UKSSCSC CPC_206_2005 (29 September 2006)

CPC/0206/2005

DECISION OF THE SOCIAL SECURITY COMMISSIONER

Decision

1. In one sense this appeal by the claimant succeeds, but it will bring her no advantage. In accordance with the provisions of section 14(8)(a) of the Social Security Act 1998 I set aside, as having been made in error of law, the decision of the Middlesbrough tribunal of 29^th October 2004 made under reference U/44/230/2004/01366. However, I substitute my own decision to similar effect. This is that in respect of the claim made on or about 14^th July 2003

(a) the decision of the Secretary of State on or about 7^th October 2003 awarding state pension credit (SPC) from 6^th October 2003 to 14^th October 2008 is revised for official error

(b) that decision is replaced with the decision that should have been made, that is: to award SPC from 6^th October 2003 but not to specify an assessed income period

(c) I supersede for change of circumstances (the receipt of the proceeds of sale of the house to which I refer below as number 8) the award in (b) above so as to end entitlement to SPC as from 17^th February 2004.

Background and Procedure

2. I held an oral hearing of this appeal on 2^nd August 2006. The claimant did not attend but was represented by Emma Baldwin from the Free Representation Unit. The Secretary of State was represented by Sean Wilson from the office of the Solicitor to the Department for Work and Pensions. I am grateful to them for their assistance and for their helpful written submissions.
3. The basic facts and the relevant calculations are not in dispute. The essential issue between the parties relates to the power of the tribunal to revise for official error a decision based on the exercise of discretion.
4. The claimant was born on 7^th May 1920 and throughout the relevant period has lived alone. At the beginning of the relevant events she lived in house which she owned, free of any mortgage or home loan, at number 8. She then put number 8 up for sale and rented sheltered accommodation at number 23, but there was some delay before she could move because a number of matters had to be attended to in connection with number 23. On 14^th July 2003 the claimant made an advance claim for state pension credit (SPC) and on the claim form gave the above information together with the fact that at that time she had savings of £19,500.
5. On 23^rd July 2003 the claimant confirmed to the Secretary of State that she owned number 8 and that it was up for sale, and she sent a copy of an estate agent's advertisement asking for offers in the region of £84.950 (pages 17 to 19 of the file). On 4^th August 2003 she was interviewed by one of the Secretary of State's officials and confirmed that she was still living at number 8, that she would move into number 23 as soon as it was ready, that meanwhile she was paying rent for it, and that she would inform the Department of the net proceeds of sale (page 20).
6. On 19^th August 2003 the Secretary of State determined that the value of number 8 should be disregarded for the purposes of the claim for so long as the claimant continued to live there but that should she leave the property or sell the property "this decision will change". This was not in fact a decision deciding the claim and the wording is sloppy but the main point is that whoever dealt with this on behalf of the Secretary of State also asked that whomever the document was addressed to should "please [therefore] control any sale progress & change of address" (page 21).

On 29^th September 2003 the claimant reported that she was now living permanently at number 23 and that number 8 was still for sale but because of expected work on a major road nearby the valuation had been reduced to £70,000 (page 22).

7. There is a lamentable lack of official documentation in this case but it is agreed that on 7^th October 2003 the Secretary of State awarded SPC of £13.02 weekly (in respect of savings credit) for the period ("the assessed income period") 6^th October 2003 (when the provisions for the savings credit element of pension credit came into effect) to 14^th October 2008. On 18^th February 2004 the claimant informed the Department that number 23 had been sold and that the proceeds in her hand, received two days previously, amounted to £73,297.50. On 28^th April 2004 the Secretary of State revised the decision of 7^th October 2003. Again I do not have a copy of the revision decision (obscure computer printouts are not the same as a decision reciting the necessary formalities) but it seems to be agreed that the new decision really consisted of two parts. The first was to remove the original assessed income period. The second was that there was no entitlement to SPC as from 17^th February 2004 once the proceeds of sale were taken into account for the purposes of entitlement. It is not clear what period was substituted for the original period (and on 7^th October 2003 it could not have been known that the claimant would receive the proceeds of sale on 16^th February 2004) but that is no longer significant. This is because on 14^th May 2004 the claimant appealed to the tribunal against that decision of the Secretary of State. That meant that the tribunal now stood in the shoes of the Secretary of State and was able to do whatever the Secretary of State should have done at the date of his decision. Unfortunately the tribunal's analysis was no clearer, but it is now the Commissioner who stands in the shoes of the Secretary of State.
8. The tribunal considered the matter in on 29^th October 2004 in the absence of the parties and confirmed the decision of the Secretary of State, simply asserting that the Secretary of State was entitled to revise an erroneous decision "which in this case was fixing an assessed income period for a period of 5 years when an actual change occurred much sooner". That analysis could not have been correct because the date of the decision preceded the change, but the tribunal gave no further explanation. On 20^th December 2004 the chairman of the tribunal refused to grant the claimant leave to appeal to the Commissioner against the decision of the tribunal. She now appeals by my leave granted on 9^th May 2005.

The Relevant Law

9. For the purposes of the present case, section 6(1) of the State Pension Credit Act 2002 requires the Secretary of State to specify an assessed income period (AIP) when awarding SPC. The effect of sections 4 and 7 is that although the amount awarded may be changed by regulations (which will usually be generally applicable), income is regarded as fixed for the whole of the AIP. This includes deemed income from capital, which in most cases is £1 weekly income for each £500 or part of £500 in excess of £6000 irrespective of the actual income from the capital. Thus, in the present case, the proceeds of sale of £73,297 produce a further deemed weekly income of £146 or £147.
10. In the House of Commons Standing Committee which discussed these provisions, the Minister for Pensions stated:

"Let us be clear about this: if a pensioner wins the lottery in the second week of his or her assessed income period, the increase in capital, be it £10 or

£1 million, will not be reflected in the pension credit entitlement until the end of the AIP".

However, the issue in this case is what the Secretary of State should do if it is known that a large amount of capital is likely to be on its way.

11. By virtue of section 6(6), section 6(1) is subject to section 9. In so far as is relevant, section 9 of the Act provides as follows:

9(1) An assessed income period shall (subject to subsections (2) to (4)) be the period of five years beginning with the day on which the relevant decision takes effect

9(2) If the Secretary of State considers that the particulars of the claimant's retirement provision … are not likely … to be typical of the claimant's retirement provision throughout the period of 12 months beginning with the day on which that decision takes effect –

(a) he need not specify a period under section 6(1); and

(b) if he does so, he may specify a period shorter than five years …

In this case, the Secretary of State did not initially exercise his power under section 9(2) of the 2002 Act. That being so, what power did he have to change the decision in relation to the AIP?

12. The initial decision of 7^th October 2003 was a decision of the Secretary of State under section 8(1)(a) of the Social Security Act 1998 (SPC is specified in section 8(3)(bb) as a relevant benefit for these purposes). This includes the decision in relation to the AIP because the Secretary of State cannot (in a case like the present one) award SPC without also either specifying an AIP or exercising his power under section 9(2)(a) of the 1992 Act.
13. In so far as is relevant, section 9(1) of the 1998 Act provides as follows:

9(1) … any decision of the Secretary of State under section 8 above … may be revised by the Secretary of State –

(a) either within the prescribed period or in prescribed case and circumstances; and

(b) either on an application made for the purpose or on his own initiative

14. Section 9(3) provides that, subject to exceptions which do not apply in this case, a revision shall take effect from the date on which the original decision took effect (which in the present case was 6^th October 2003).
15. Regulation 3(5)(a) of the Social Security and Child Support (Decisions and Appeals) Regulations 1999 provides that a decision of the Secretary of State "which arose from an official error" may be revised at any time by the Secretary of State. I deal below with the question of whether there was an official error justifying revision. This is the main area of dispute between the parties.
16. Section 10 of the 1998 Act provides for supersession of decisions made under section 8 or section 9. Regulation 6(2)(a) of the Social Security and Child Support (Decisions and Appeals) provides that a supersession decision may be made on the Secretary of State's own initiative or on an application, on the basis that there has been, or it is anticipated that there will be, a relevant change of circumstances since the decision took effect. Regulation 7 provides that in a case such as the present one the supersession decision takes effect from date of the change of circumstances.

Was There An Official Error?

17. "Official Error" is defined in regulation 1(3) of the Social Security and Child Support (Decisions and Appeals) Regulations 1999 to mean:

an error made by –

(a) an official of the Department for Work and Pensions … which no person outside the Department … caused or to which no person outside the Department materially contributed;

(b) …

18. This definition does not take the notion of "error" much further. Ms Baldwin argued that for the decision of 7^th October 2003 to have arisen from an official error, either the Secretary of State must have made a public law error (such as a defective or invalid exercise of his discretion) or a perverse or irrational decision such that no person acting properly and rationally could have made, or possibly that he must have overlooked evidence or the fact that he had a discretionary power. None of these factors had been established in the present case. The decision was within the range of reasonable and proper decisions.
19. Mr Wilson argued that the Secretary of State could not have properly exercised his discretion to fix a 5 year (or any) AIP in 2003. He had clearly failed to exercise his discretion at all, otherwise he would not have made such a decision. Thus there was 20. an error of law which amounted to an official error. The Secretary of State's own guidance to decision makers states that an AIP should not be set in cases such as the present one. The definition of official error in regulation 1(3) is permissive and can include any type of error including, but not limited to, most errors of law. Previous decisions by Commissioners had found the concept to include failure to follow Departmental procedure, failure to act on information and the provision of incorrect information. There was no authority to support the proposition that official error was limited to public law errors.
20. The parties referred to the decision of the Commissioner in R(CS)3/04. That case was about who came within the definition of an official for the purposes of official error and I do not find that the Commissioner's general comments on the nature of an official error take the matter any further. In a housing benefit case the Commissioner has referred to the need for a "clear and obvious" error of fact or law (R(H)2/04 at paragraph 13). In the present case the issue is whether there was a wrongful exercise of discretion that amounted to an error and there is no question of any error of fact or other kind of error of law.
21. Reference has also been made to R(IS) 15/04 and Beltekian [2004] EWCA Civ 1784 but I agree with Mr Wilson that those decisions are about how to challenge a refusal to review, not about the grounds of review.
22. It seems to me that the concept of "error" involves more than merely taking a decision that another decision maker with the same information would not take, but is not limited to (although it includes, subject to the statutory exceptions) a public law or any other error of law. Other than that it is not helpful (and could be misleading) to go beyond the words of the regulation. On the facts of the present case, though, I take the view that no Secretary of State or decision maker acting reasonably could have imposed a 5 year AIP. It was already known that number 8 was up for sale and that it would realise a sum of several tens of thousands of pounds (even if the exact amount was not known) and a view had already been taken that the progress of the sale should be monitored. In these respects the position was very different from that of a lottery winner who, at the time of the decision on the claim, had done no more than buy a ticket.

Legitimate Expectation

23. Ms Baldwin further argued that section 9(1) of the 1998 Act conferred a discretionary power because it states that a decision "may" be revised by the Secretary of State, and this discretion had been wrongly exercised because it had not taken account of the legitimate expectation of the claimant that the award would last for 5 years. I do not accept this. No undertaking had been given by the Secretary of State, nor had any policy statement been made that was inconsistent with the decision to revise the initial award. The doctrine of legitimate expectation simply does not arise in this case.
24. Much of the correspondence from the claimant throughout this matter has expressed resentment that she has had to spend money from her own savings. At the date of claim, in addition to her pension income she had capital of £19, 500 and a house free from mortgage and for which she expected to receive somewhere between £70,000 and £85,000 by way of proceeds of sale. This is more money than most people have at any one time in the whole of their lives. Insofar as the claimant expected that her SPC could remain unreduced and paid for from taxation of people with less money than herself, I fail to see how this can be regarded in any way as legitimate in the absence of an absolute legal rule to this effect.

Supersession

25. There was an obvious change of circumstances when the claimant received the proceeds of sale of number 8 and that is why I also make the decision indicated in paragraph 1(c) above.

H. Levenson

Commissioner

29^th September 2006