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[2008] UKSSCSC CIS_1390_2007 (19 August 2008)

DECISION OF THE SOCIAL SECURITY COMMISSIONER

The Secretary of State for Work and Pensions' appeal to the Commissioner is allowed. The decision of the Nottingham appeal tribunal dated 11 October 2006 is erroneous in point of law, for the reason given below, and I set it aside. It is expedient for me to substitute the decision on the claimant's appeal against the Secretary of State's decision dated 6 January 2005 that the appeal tribunal should have given on its findings of fact (Social Security Act 1998, section 14(8)(a)(i)). My decision is that that appeal is disallowed and the Secretary of State's decision is confirmed.

There have been some very unfortunate delays at past stages of this case. An oral hearing of the appeal to the Commissioner, at the request of the claimant's representatives, Nottingham Law Centre, was granted by Mr Commissioner Bano on 7 March 2008. The hearing took place before me at Doncaster County Court on 28 April 2008. The Secretary of State was represented by Mr Henry Hendron of the Office of the Solicitor to the Department for Work and Pensions. The claimant was represented by Mr Philip Baxter of Nottingham Law Centre. I directed further written submissions about an unaddressed issue that appeared to have been within the scope of the appeal. I apologise for the further delay since those submissions were received, which revealed that the issue had been the subject of a separate appeal and could not have been dealt with by the appeal tribunal of 11 October 2006 (see paragraphs 15 to 18 below).

The claimant was entitled to income support including housing costs for interest on a mortgage to secure a loan of £9,950. That was for a two-bedroomed house. Immediately before October 2004 her four children living with her were Theodore (aged 17), Matthew (aged 13), Daniel (aged 12) and Tiffanie (aged 4). On 8 November 2004 she informed the income support office on a form MI12 that she had taken out new mortgages for £10,000 (said by the lender to be an interest-only loan) and £15,000 (said to be a repayment loan) on another property. The lender initially described the £15,000 as for home improvements rather than purchase, but the claimant has later made clear that both were for the purchase of the new property. A subsequent enquiry produced confirmation that the old mortgage had been paid off on the sale of the old property and the purchase of the new property, but no questions were asked about the reasons for the move or the size of the new property. The new mortgages were dated 6 October 2004, so that was presumably the date of the move.

A decision was then given on 6 January 2005 that the claimant's housing costs were restricted to the interest on the amount of the old mortgage, in accordance with paragraph 4(6) of Schedule 3 to the Income Support (General) Regulations 1987 ("Schedule 3"). There was no mention in the decision on page 35 of any ground of supersession, but presumably in substance there was a ground of supersession in a relevant change of circumstances that resulted in no superseding decision being made because the amount of housing costs allowed did not alter. A notification was apparently sent to the claimant, but possibly because payment of income support was suspended (later reinstated with arrears) for other reasons, the claimant did not query the amount of mortgage interest allowed until after the annual recalculation of housing costs (paragraph 8(1A)) in November 2005. In response to her telephone call on 30 November 2005 an officer issued a notification on the same date that with effect from 3 November 2004 housing costs were restricted to the amount of the original mortgage figure, which was then amended to £9,476.66 from 3 November 2005 (for a reduction in the amount of capital outstanding).

The basic rule in paragraph 4(2) of Schedule 3 is that no housing costs are to be allowed for any loan taken out while in receipt of income support. The exception in paragraph 4(6)(b) applies when the loan has been used to purchase a property where an earlier loan that qualified under Schedule 3 for another property was paid off in whole or in part by the proceeds of sale of the property. Housing costs equal to the amount allowed under the previous qualifying loan are then allowed.

Nottingham Law Centre lodged an appeal in response to the decision, challenging what it then thought was the allowance of only one of the new mortgages. That was treated as an appeal against the decision of 6 January 2005, as well as an appeal against the decision with effect from 3 November 2005 (which it turns out was dealt with separately). The appeal against the decision of 6 January 2005 was sent to the clerk to the appeal tribunal as a late appeal. A first letter from the clerk stated that the appeal had not been admitted, but a second letter dated 18 May 2006 stated that the appeal had been admitted. No point has been taken for the Secretary of State about the admission of the appeal against the decision of 6 January 2005.

In a written submission that appeared not have been included in the papers before the appeal tribunal, Nottingham Law Centre made the argument that, as the claimant's new house had four bedrooms, the primary reason for her move was to provide separate sleeping accommodation for children of different sexes and that the circumstances fell within the further exception to paragraph 4(2) of Schedule 3 in paragraph 4(10). That allows all of the interest on a loan to be allowed as a housing cost when there has been a change of dwelling made "solely by reason of the need to provide separate sleeping accommodation for children of different sexes aged 10 or over who belong to the same family as the claimant". There was reliance on Commissioner's decision CIS/14657/1996, which was to do with whether part of a loan could be allowed under paragraph 16(2)(l) of Schedule 3 on repairs and improvements as having been taken out for the purpose of "provision of separate sleeping accommodation for children of different sexes aged 10 or over who are part of the same family as the claimant". There, at the date of the taking out of the loan one child was over 10 and the other was eight. Mr Commissioner Howell QC held that a loan could be accepted as for the statutory purpose when one child was already over 10 and the other was going to attain that age in the reasonably near future.

The appeal tribunal accepted the argument for the claimant and allowed housing costs arising from both new loans. It found that no other arrangements could have been made in the old house to allow the children to sleep separately and that, although the area of the old house had several problems, the move was to allow Tiffanie to have a bedroom to herself. The appeal tribunal also accepted that Tiffanie had sone health problems that made sharing with her brothers more difficult, but not so much as to get within the special provisions on disability. The new four-bedroomed house had been cheaper than three-bedroomed houses, as it had been reduced for a quick sale. The statement of reasons contained the following:

"13. CIS/14657/1996 the decision maker accepts that this decision indicated that there may have been more than one reason for the move but that it has to be a primary reason. Also R(IS) 5/01 confirms that there can be more than one reason for moving.

From the facts found above the Tribunal was satisfied that the primary reason for the move was to provide separate sleeping accommodation as anticipated in 10(b). The Tribunal found that [the claimant] gave a credible and consistent account of her reasons for moving and that whilst she regarded the area as unsuitable she had not chosen to move before. The improvement in the area was a by-product of the move not the motivation for it. The same applied for the increased facilities in the new address.

The Tribunal took into account that whilst the existing sleeping arrangements were unsatisfactory that it was the situation that would pertain when Tiffanie was 10 not what the situation was now which was of relevance.

14. The decision maker submitted that the move was precipitous bearing in mind Tiffanie's age at the time (4) and that it was `inherently improbable that the primary reason for the move was to accommodate a situation possibly to arise 5 years later'. However whatever the 2 eldest children were to do the Tribunal found on a balance of probabilities that it was unlikely that Daniel would be living elsewhere other than at home once Tiffanie was 10 years old as at that stage he would still only be 17. There was no evidence that he had lived elsewhere and the Tribunal did not find that the situation was inherently improbable as submitted. That being the case even if the two eldest sons had left and separate beds could be provided Tiffanie and Daniel would still be faced with sharing a room as there was nowhere else in the house either could sleep.

15. The Tribunal was referred to case law under paragraph 16 as this allowed for costs for repairs to ensure separate accommodation in such circumstances. CIS/5119/2001 talks of the nature and purpose of the loan at the time it was taken out rather than at a later date. The Tribunal in this case found that the primary reason for the move (as opposed to a loan for improvements) was to provide separate sleeping accommodation for Tiffanie when she was 10 and although 5 years was a long time for the reasons above it was an almost inevitable consequence and as such [the claimant] fell within paragraph 10(b)."

The Secretary of State now appeals against that decision with the leave of Mr Commissioner Bano. The first ground put forward was that the decision of Mr Commissioner Turnbull in CIS/5119/2001 had in fact (although in the repairs and improvements context) been that the children needed already to be 10 or within a year or so, rejecting a contrary view expressed by Mr Commissioner Angus in CIS/1678/1999. The appeal tribunal's decision was inconsistent with that approach. The second ground was that the appeal tribunal had misinterpreted R(IS) 5/01 by asking what was the primary reason for the move, rather than what was the sole reason. In a more recent decision, CIS/2567/2006, Mr Commissioner Angus, while not persuaded that he had been wrong in CIS/1678/1999 in relation to paragraph 16(2)(l) of Schedule 3, pointed out what he regarded as a crucial difference in the terms of paragraph 4(10) in the requirement that the need to provide separate sleeping accommodation be the sole reason for moving from the previous home.

At the oral hearing, Mr Hendron for the Secretary of State took a robust approach. His first submission was that paragraph 4(10) of Schedule 3 could only apply when at the date of the loan in question being taken out the claimant's family included both a male and a female child who had attained the age of 10. I reject that submission. It is inconsistent with the test being in terms of "the need to provide" separate sleeping accommodation. That need plainly exists in advance of the youngest child's tenth birthday in order for the provision to be in place on that date. In R(IS) 5/01 I gave a direction to the same effect to a new appeal tribunal and the Court of Appeal made no adverse comment on that direction. Mr Hendron's second submission, if the first were rejected, was that, to provide a practically workable rule, the youngest child had to have attained the age of nine at the date of the loan. I also reject any such rigid rule. I did not find Mr Hendron's submissions about the age at which there would be reasonable worries about children of the opposite sex sharing bedrooms helpful. I rather agree with Mr Baxter for the claimant that the policy apparently enshrined in paragraph 4(10) on its introduction in 1994 now looks out of tune with changes in the rate of maturing of children and adolescents and with present-day concerns over child protection. But my task is to interpret the provision as it was enacted. In my judgment the statutory test is not to be re-interpreted into a rigid rule of the kind proposed by Mr Hendron. The test can only be of whether at the time of the loan being taken out a need as described above existed and whether it was the sole reason for moving from the previous home.

However, I can see no way it which it could possibly be said in the present case that the need to make provision for circumstances that might exist when Tiffanie reaches the age of 10 on 17 December 2009 existed as at October 2004. The argument for the claimant before the Court of Appeal in R(IS) 5/01 introduced some confusion by describing the approach that I had adopted, of looking at the reasons for leaving the old home, as a subjective one. But by approving that approach the Court of Appeal plainly did not intend to hold that paragraph 4(10) was satisfied simply by a claimant's acting solely on genuine belief that a need currently existed. The need must exist as an objective matter. That was confirmed by Mr Commissioner Jacobs in CIS/1068/2003.

Here, despite the appeal tribunal's speculation about the claimant's youngest son still being in her household in December 2009, in truth no-one can possibly predict what the circumstances will be then. There is also a technical legal problem. Paragraph 4(10) of Schedule 3 is concerned with children. "Child" is defined in section 137(1) of the Social Security Contributions and Benefits Act 1992, unless the context otherwise requires, as a person under the age of 16. By December 2009, the claimant's youngest son would be 17. Prima facie, he would no longer be a child for the purposes of paragraph 4(10), so that the there could not be a relevant need. It is perhaps the strangest aspect of paragraph 4(10) that it does not apply when the need is to provide separate sleeping accommodation for a child aged 10 or over and an adult of the opposite sex. In some other case full argument might be needed as to whether the context of paragraph 4(10) requires "child" to be given a broader meaning than in section 137(1). I do not have to decide that issue here. Even if the claimant's younger son would still be regarded as a child on 17 December 2009, a need to provide separate sleeping accommodation for him and Tiffanie could not be said to have existed in October 2004. The appeal tribunal's conclusion was therefore one that no reasonable tribunal properly instructed as to the law could have reached and in error of law.

Even if that were wrong, and the statutory need did objectively exist, it was so remote that it was impossible to say that it was the sole reason for the move. There is force in the Secretary of State's submission that an additional reason for moving more than five years in advance of Tiffanie's tenth birthday must have been to alleviate the obvious pressing need for more sleeping space for the family as a whole. If the appeal tribunal took the view that paragraph 4(10) could apply if the relevant need was merely the primary reason for the move, that was wrong in law and a misinterpretation of the decision of the Court of Appeal in R(IS) 5/01. What was accepted there was that there could be additional reasons for choosing the particular new home, otherwise paragraph 4(10) of Schedule 3 would never apply in practice, so that the focus has to be on the reason for leaving the previous home. But within that focus, the Court of Appeal confirmed that the need to provide separate sleeping accommodation for children aged 10 or over of opposite sexes had to be the sole reason for leaving. That is why the Court of Appeal dismissed the appeal from my decision that the appeal tribunal in that case had not erred in law in finding the existence of a desire to move to more adequate and roomy accommodation generally was fatal to success under the predecessor of paragraph 4(10).

For all those reasons, the decision of the appeal tribunal must be set aside as erroneous in point of law. It is then expedient for me to substitute the decision that the appeal tribunal should have given. The only decision that it could have reached consistent with the law and the evidence before it was that paragraph 4(10) of Schedule 3 was not satisfied, so that the Secretary of State's decision of 6 January 2006 was to be confirmed. Although no-one could doubt that what the claimant did in the circumstances was entirely reasonable and proper (leaving aside the question of how she was going to pay the mortgage loans), the test in paragraph 4(10) was not satisfied. Her appeal against the decision of 6 January 2005 has to be disallowed. My decision to that effect is set out in paragraph 1 above.

Postscript

The further submission for the Secretary of State following the oral hearing has revealed that the claimant's appeal against the decision dated 15 November 2005 in relation to the reduction of housing costs with effect from 8 November 2005 was dealt with separately from the appeal in the present case, under tribunal reference no U/42/045/2006/00910. The appeal was disallowed by the appeal tribunal of 11 October 2006 in a separate decision, although it is not clear how it was intended that the decision in the present case was to impact on the outcome in terms of the amount of weekly benefit. The claimant, so far as I know, made no application for leave to appeal against the decision in 00910. I have no power to do anything about that decision, but merely note the following in case Mr Baxter might be considering an application to supersede that decision of the appeal tribunal for ignorance or mistake of material fact.

The information provided by the lender on the form MI12R signed on 11 November 2005 seems odd. First, the Department had only asked for information about the £10,000 loan, by mentioning only the reference number of that loan and not the reference number for the £15,000 loan. It was the £10,000 loan that had originally been described as interest-only. Thus one would not have expected the amount of capital outstanding on that loan to decrease during the first year, although one would have expected the capital outstanding on the ordinary repayment loan to reduce. Yet the MI12R of 11 November 2005 stated the current amount outstanding on the £10,000 loan to be £9,476.66 and that that balance had applied since 1 January 2005. It was the figure of £9,476.66 that the decision-maker then used in calculating the allowable housing costs on the annual review from 8 November 2005, in place of £9,950. Unless the claimant had made some repayment of capital (whether through overpayment of interest or otherwise) in the early months of the mortgage (which seems unlikely in her difficult financial circumstances at the time) there is no obvious explanation of the reduction in the capital outstanding.

And there is still an argument that so long as the capital outstanding on all loans that qualified under paragraphs 15 and 16 of Schedule 3 exceeded the amount on which housing costs had been allowed under the previous loan (£9,950), the interest payments on all the loans should be allowed subject only to the limit to £9,950. Paragraph 8(1) and (1A) of Schedule 3 does not say that on each anniversary of the taking out of a loan housing costs are to be reduced in proportion to the reduction in capital outstanding. It merely says that the eligible capital for the time being owing to which the standard rate of interest is to be applied is to be determined at each anniversary of the loan. Why should not the capital for the time being owing on more than one loan be aggregated, especially when the loans are made separate for the administrative purposes of the same lender, and the total used, subject only to any limits imposed under paragraph 4 or any other provision in Schedule 3?

This is a highly technical matter and I do not purport to have given anything other than a preliminary view. It is entirely up to the claimant and Mr Baxter if they wish to pursue it. As noted above, the vehicle for challenging the decision of the appeal tribunal on 00910 would probably now have to be an application for supersession. Alternatively there could be some challenge to a more recent decision. The documents from that appeal that were attached to the Secretary of State's further submission of 22 April 2008 have not been numbered by the Commissioners' office. I am therefore not sure whether copies were sent to Mr Baxter with a copy of that further submission. If they were not, copies will be sent to him if he writes to the Commissioners' office.

(Signed) J Mesher

Commissioner

Date: 19 August 2008