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[2008] UKSSCSC CPC_204_2006 (17 April 2008)

CPC/204/2006

DECISION OF THE SOCIAL SECURITY COMMISSIONER

My decision is that the decision of the tribunal is erroneous in point of law. I set aside the tribunal's decision, but substitute a decision to the same effect as that of the tribunal, namely, that the claimant is not entitled to a supersession decision awarding him an increase of state pension credit for housing costs consisting of the excess of actual over estimated service charges for the year 2002-2003.

Paragraph 13(1) of Schedule II to the State Pension Credit Regulations 2002 (which is in the same terms as the corresponding provisions in the Income Support (General) Regulations 1987) provides for service charges to be included in housing costs when calculating the minimum guaranteed state pension credit to which a claimant is entitled. The question in this case is how an award of state pension credit or income support which is based on estimated service charges should be adjusted when the actual amount of service charges for which a claimant is liable is finally determined. A further question arises in relation to the time within which an application for such an adjustment must be made. At an oral hearing on 18 May 2006, I granted leave to appeal against a decision of the tribunal purporting to uphold a decision refusing to revise an award of state pension credit so as to take into account the excess of actual over estimated service charges, and I held an oral hearing of the appeal itself on 7 March 2007. That hearing was attended by the claimant, who is a retired solicitor, and by Mr Jeremy Heath, solicitor, on behalf of the Secretary of State. There have been further written submissions since the appeal hearing.

The claimant and his wife occupy a former local authority flat under a long lease granted by a housing authority on 1 December 2004. The claimant purchased the property on 20 August 1990 and there must therefore have been an earlier lease of the premises, but that lease has not been produced in these proceedings. However, the invoices on which the claimant's claims for housing costs were based indicate that the earlier service charge provisions were similar to those in the current lease.

The lease is at a peppercorn rent, but under clauses 1B and 3(A), the lessee covenants to pay the lessor by way of further rent "such annual sum as may be notified to the lessee by the lessor from time to time as representing the due and proper proportion of the reasonably estimated amount required to cover the costs and expenses incurred or to be incurred by the lessor" in carrying out the lessor's repairing and maintenance obligations in each financial year running from 1^st April to 31^st March, referred to in the lease as the "lessor's management charges". Clause 3(B) makes further provision in respect of major repair works, and clause 3(C) provides that the lessee will:

"pay to the lessor on demand the amount by which the estimated sum paid by the lessee to the lessor under sub-clause (A) or (B) of this clause in respect of the management charges for each financial year as aforesaid (including unpaid charges incurred in a previous financial year as aforesaid)…is less than the due proportion payable by the lessee of the total monies properly and reasonably expended or retained by the lessor constituting the management charges for such financial year…"

The claimant was awarded income support in 2002, and on 20 November 2002 he sent a letter to the DWP enclosing an invoice for £431.84 in respect of estimated service charges for the year 2002-2003. At that time income support which included housing costs was in payment on the basis of the level of service charges for the year 2001-2002, which was higher than the amount for 2002-2003. In response to the claimant's letter, the decision awarding income support was purportedly revised on 5 March 2003, so as to reduce the amount of housing costs to the estimated 2002-2003 figure. An overpayment recovery decision was also made in respect of excess housing costs paid in the period 30 September 2002 to 9 March 2003, amounting to £27.60. Although that decision is not before me, I feel bound to observe that most of the overpayment of benefit seems to have resulted from delay in dealing with the claimant's letter.

The claimant's award of income support was converted into an award of state pension credit on 6 October 2003 on the commencement of the State Pensions Credits Act 2002, at which time the claimant's housing costs were being calculated on the basis of estimated service charges for the year 2003-2004 of £564.94. On 22 November 2004 a letter was received from the claimant, enclosing an invoice showing the actual service charges for the year 2003-2004 as £687.12, and asking for payment of the difference between that amount and the estimated service charges of £564.94. The claimant was in due course paid the difference between those two amounts, amounting to £122.18.

However the claimant's letter also asked for payment of the difference between the actual and estimated service charges for the year 2002-2003, amounting to £243.85, and it is the refusal of that request which gives rise to this appeal. The refusal was on the basis that the decision sought to be revised was the revision decision of 5 March 2003, so that the application made on 22 November 2004 was outside the absolute 13 month time limit imposed by regulation 4(3)(b) of the Social Security (Decisions and Appeals) Regulations 1999. The tribunal accepted that the claimant had good cause for his late application (although that is not in fact the correct test for deciding whether to extend the time limit for an application to revise), but upheld the refusal to revise because of the absolute 13 month time limit.

As Mr Heath pointed out in his written submission of 17 May 2006, a decision under section 9 of the Social Security Act 1998 to revise or not to revise an earlier decision cannot be appealed to a tribunal, and a challenge to a refusal to revise is by way of an appeal against the original decision. However, as the Tribunal of Commissioners made clear in R(IB) 2/04, if a tribunal decides that the Secretary of State's refusal to change a previous decision is wrong, it has jurisdiction to make the revision or supersession decision which the Secretary of State ought to have made (para. 55). Under regulation 6(5) of the 1999 Decisions and Appeals Regulations, the Secretary of State had power to treat a notification of a change of circumstances as an application for supersession on that ground. A refusal to alter a previous decision may imply a refusal to supersede as well as a refusal to revise, so that the tribunal in this case undoubtedly had power to supersede the most recent awarding decision, as revised on 5 March 2003, if a relevant change of circumstances had taken place since the decision was made.

In a written submission dated 30 June 2006, made in response to my direction of 18 May 2006, the Secretary of State's representative submitted that the service charge demand for the difference between the actual and estimated service charges represented a change of circumstances, so as to form a ground for supersession. I consider that submission to be correct.

As Mr Commissioner Mesher noted in CIS/5242/1995, any approach whereby service charges do not count as housing costs until they are finalised would be impractical and, furthermore, would not in my view properly reflect the claimant's liability under the lease. Assuming that the lease in force in 2002-2003 was similar to the current lease, the claimant became liable to pay his share of the service charges on an estimated basis as soon as a demand for the charges was made. A decision awarding benefit can be revised on the ground of official error or ignorance of, or mistake as to, a material fact, but in my judgement the finalisation of the actual service charges for the relevant accounting year did not in any way falsify the decision awarding housing costs on an estimated basis. Service charges were correctly demanded from the claimant on an estimated basis under the equivalent of clause 3(A) in the earlier lease, but the claimant was not liable to distraint for any additional amount in respect of the actual amount of service charge expenditure until that amount had been finally determined-see Concorde Graphics Limited v Andromeda Investments [1983] 1 EGLR 53 and Eves v Tranmac Limited [1997] 2 EGLR 211. Once the claimant's liability in respect of actual expenditure had crystallised, he came under a new and separate liability, under the equivalent of clause 3(C) in the current lease, which in my view was properly to be regarded as a change of circumstances. The importance to a claimant of applying the supersession rather than the revision regime in cases such as this is that otherwise the time limits for applying for a revision could prevent a claimant from receiving the full amount of housing costs to which he is entitled if there is a long delay by a lessor or managing agent in finalising the service charges. The difficulty is exactly how to apply the supersession provisions to such cases, and I directed further submissions on that issue in a direction dated 18 September 2007. The Secretary of State's representative responded to my direction in a submission dated 19 October 2007.

Paragraph 13 of Schedule II to the State Pension Credit Regulations 2002 provides that "there shall be met under this paragraph the amounts, calculated on a weekly basis, in respect of the following housing costs", which include service charges. The housing costs to which the claimant became entitled on receiving the demand for £243.85 was therefore that amount divided by 52, that is, £4.69 per week. Subject to any time limits, the claimant was therefore entitled to a supersession decision increasing his award of state pension credit by that amount. However, the question arises of what action was needed to terminate the increase in benefit at the end of the 52 week period. Regulation 17(3) of the Social Security (Claims and Payments) 1987 enables an award of benefit to be made for a fixed period where it is foreseen that the conditions of entitlement will no longer be met after a future date, but that was not the position in this case and, in any case, regulation 17(3) does not apply to state pension credit.

I agree with the Secretary of State's submission that the answer to the question lies in regulation 6(2)(a)(ii) of the Social Security (Decisions and Appeals) Regulations 1999, which allows a supersession decision to be taken "if it is anticipated that a relevant change of circumstances will occur". The fact that a claimant has received the full amount of the housing costs to which he is entitled by way of weekly instalments must in my view be considered a change of circumstances, since otherwise there would be no way of terminating awards which must be calculated on a weekly basis under the state pension credit and income support regulations. However, I agree with the Secretary of State's submission that it is not necessary to wait until the end of the 52 week period before terminating the award. Regulation 6(2)(a)(ii) enables a composite decision to be made increasing benefit by the weekly amount of the allowable housing costs under regulation 6(2)(a)(i), and also removing the weekly increase at the end of the 52 week period under regulation 6(2)(a)(ii), on the basis of the anticipated change of circumstances.

However, there is a difficulty resulting from the claimant's delay in notifying the Department of the final 2002-2003 service charges. The evidence which he gave to the tribunal was that he received the invoice for the difference between actual and estimated service charge expenditure for the year 2002-2003 on 9 September 2003, which is the date shown on the invoice (although the charge does not seem to have been posted to the claimant's rent account until 30 September 2003). He stated that he and his wife were in poor health and that he had had a number of meetings with Council officials in an attempt to get them to itemise and justify the service charges, and that it was for those reasons that he had not notified the DWP of the finalised service charges until November 2004. However, at the oral hearing of the appeal before me the claimant said that he had carried out a further check of his diary, which had revealed that he had not in fact received the invoice for the balance of the 2002-2003 service charges until 30 October 2003, that is, less than 13 months before he wrote to the DWP informing them of the final service charges.

Section 10(5) of the Social Security Act 1998 provides that, subject to regulations made under section 10(6), a supersession decision shall take effect from the date when it is made or, where applicable, the date on which the application was made. Regulation 7 of the Social Security (Decisions and Appeals) Regulations 1999, so far as material, provides:

"(2) Where a decision under section 10 is made on the ground that there has been, or it is anticipated that there will be, a change of circumstances since the decision had effect or in the case of an advance award, since the decision made, the decision under section 10 shall take effect-

(a) from the date the change occurred or, where the change does not have effect until a later date, from the first date on which such effect occurs where-

(i) the decision is advantageous to the claimant; and

(ii) the change was notified to an appropriate office within one month of the change occurring or within such longer period as may be allowed under regulation 8 for the claimant's failure to notify on an earlier date;

(b) where the decision is advantageous to the claimant and the change was notified to an appropriate office more than one month after the change occurred or after the expiry of any longer period as may have been allowed under regulation 8-

(i) in the case of a claimant who is in receipt of income support, jobseeker's allowance or state pension credit and benefit is paid in arrears, from the beginning of the benefit week in which the notification was made;

(i)...

(iii)..."

The relevant provisions in regulation 8 are:

"(1) For the purposes of regulation 7(2) and (9), a longer period of time may be allowed for the notification of a change of circumstances in so far as it affects the effective date of the change where the conditions specified in the following provisions of this regulation are satisfied.

(2) An application for the purposes of regulation 7(2) or (9) shall be made by the claimant or a person acting on his behalf.

(3) The application referred to in paragraph (2) shall-

(a) contain particulars of the relevant change of circumstances and the reasons for the failure to notify the change of change of circumstances on an earlier date; and

(b) be made within thirteen months of the date the change occurred.

(4) An application under this regulation shall not be granted unless the Secretary of State...is satisfied that-

(a) it is reasonable to grant the application;

(b) the change of circumstances notified by the applicant is relevant to the decision to be superseded; and

(c) special circumstances are relevant to the application and as a result of those special circumstances it was not reasonably practicable for the applicant to notify the change of circumstances within one month of the change occurring."

Paragraphs (4) and (6) specify the matters to be taken into account when deciding whether it is reasonable to grant the application.

Despite the explanation given by the claimant before the tribunal and before me, his letter of 19 November 2004 said nothing about the reasons for the delay in notification of the final amount of the 2002-2003 service charges, which even on the claimant's most recent account of events, amounted to more than a year. Even assuming that the claimant did notify the final amount of service charges within thirteen months of receiving the demand, I therefore agree with Mr Heath's submission that no valid application was made under regulation 8 of the 1999 Decisions and Appeals Regulations and that, accordingly, any supersession decision could not take effect under regulation 7(2)(a) as from the date when the change in circumstances took effect. However, the claimant remained under a continuing liability to pay the final service charges, and in my direction of 18 September 2007 I asked whether the claimant could nevertheless receive an award for the full amount of the final service charges on the basis that under section 10 of the 1998 Act any supersession decision would take effect from the date when the supersession application was made. If that is the correct interpretation of the provisions, the claimant will have suffered no disadvantage from his late application, except to the extent that he would have received an increased amount of benefit earlier if he had acted promptly.

I am however satisfied that that is not the position. The supersession provisions contain no time limits as such for applying for applying for supersession of a decision awarding benefit, but in the normal case of a change in circumstances resulting in an advantageous supersession decision, a claimant will lose benefit for the period from the date on which the change of circumstances occurred to the date of the application or the date when the supersession decision is made if the application is not made within one month of the change, or made within such longer period as may be allowed under regulation 8. The requirement in paragraph 13 of Schedule II of the State Pension Credit Regulations 2002 and its income support equivalent for housing costs to be calculated on a weekly basis is clearly intended to bring housing costs incurred on an infrequent or irregular basis within the scope of a weekly benefit scheme, and I agree with the Secretary of State's submission in response to my direction that it cannot have been intended that a late application for a supersession in respect of housing costs within paragraph 13 should not be subject to any sanctions. In my judgement therefore, paragraph 13 must be read as requiring housing costs to be calculated on a weekly basis as from the date on which the liability for the relevant housing cost arose. As I have explained above, entitlement to benefit in respect of a housing cost within paragraph 13 ends on the expiry of the 52 week period, so that a claimant who makes a supersession application more than one month after incurring liability for a housing cost and who cannot bring himself within regulation 8 of the Decisions and Appeals Regulations is entitled to an increase in benefit only during the balance of the 52 week period. In this case, the 52 week period had expired when the claimant informed the Department of his liability for the final amount of service charges for 200-2003, so that he is not entitled to a supersession decision in respect of his liability for those costs.

The tribunal erred in law by not treating the case as one of supersession and I must therefore set aside their decision. However, for the reasons I have given, the claimant was not entitled to a supersession decision and my own decision is therefore to the same effect.

(signed on the original) E A L Bano

Commissioner

17 April 2008