Upper Tribunal (Administrative Appeals Chamber)

IN THE UPPER TRIBUNAL Case No.  CH/1752/2011

ADMINISTRATIVE APPEALS CHAMBER

Before Judge Mark

Decision:  The appeal is allowed.  I set aside the decision of the tribunal and I remit the case to be reheard by a new tribunal in accordance with the directions given below.

REASONS FOR DECISION

1.     This is an appeal by the claimant from a decision of the First-Tier Tribunal with the permission of a Judge of the Upper Tribunal.  The First-Tier Tribunal dismissed the appeal of the claimant from a decision of the Respondent Council that the claimant was not entitled to housing benefit because she had gifted to her sister a flat which she had owned, and previously occupied, and had thus deprived herself of capital well in excess of £16,000.  The tribunal concluded that obtaining housing benefit was a significant operative purpose in the decision to make the gift.

2.     The circumstances of the gift were unusual.  The claimant, who is of Asian origin but was born in this country, was married to a Bengali citizen who was living with her.  They had a son who was born in 2001.  Their home was a flat which the claimant had purchased at a substantial discount for £37,000 in 2002 under the right to buy scheme with the assistance of a 100% mortgage which she had repaid by September 2007.  Early in 2008 she transferred the flat for no consideration to her 19 year old sister, a university student, but continued to live there.  Initially, she stated to the council that she had transferred it because her sister had been good to her, but later stated that she had been under pressure from her husband to dispose of it because he found it culturally unacceptable to be seen living in a property owned by his wife.  It is not explained why it was more culturally acceptable for him to be seen living in a property owned by her younger sister.  However, it was also in evidence that he had become mentally ill, suffering from paranoia, schizophrenia and psychosis.  Within a few months of the gift, in June 2008, the claimant and her husband separated, with the claimant continuing to live rent free in the flat with her son.  By this time she was pregnant again and another child was born in December 2008. 

3.     In July 2009, after falling out with her sister, the claimant was asked to leave the flat and did so.  On 14 August 2009 she applied for housing benefit in respect of the hotel where she had gone to live.

4.     The claimant told a council investigation that when she gifted the flat to her sister she had thought she would buy somewhere else with the help of a mortgage.  She was working as, she said, was her husband, and as appears from her Halifax Bank pass book, at that time she had savings of rather over £9,000.  The claimant was herself working for the council in a position in which the tribunal found she would have a good knowledge of housing benefit rules including those relating to capital.  The tribunal found that when she gave away the flat she did so in the knowledge that at a point in the future she would need to arrange alternative accommodation and that she would be able to rely on housing benefit.

5.     The tribunal found that she also had another, although subsidiary, motive of benefitting her sister, who did not need accommodation as she was living with her mother.  It referred to CJSA/1425/2004, where it was held that if a claimant had mixed motives for disposing of capital, the question whether the purpose of obtaining benefits is a significant operative purpose is to be determined by deciding whether it was reasonable for the claimant to act in the way that he did.  It concluded that the claimant had not acted reasonably in giving away the property when it was likely that as a result of the gift she may have to rely on housing benefit to pay for accommodation in future.  In the longer term it was highly likely that the claimant would have to look for another property and apply for housing benefit.  The significant operative purpose in giving away her property was that she thought she would be able to claim housing benefit when she needed to do so.

6.     I find this reasoning to be confused.  If the principal operative purpose of the claimant was really to obtain housing benefit, then the reasonableness of her conduct becomes irrelevant.  On the other hand, I find it impossible to understand on what basis the tribunal did find, as it appears to have done, that this was the principal operative purpose of the gift, since the claimant had paid off the mortgage and was living rent free in the flat.  She had no need of housing benefit while there, and no finding is made as to why she would wish to go somewhere else, pay rent and obtain housing benefit which she would not need so long as she kept the flat.  It appears to me that whatever she may have known of housing benefit, and whatever she may have thought or not thought about the availability of housing benefit, her primary motive in the gift must have been something else.

7.     The tribunal also fails to explain why, if the claimant had such a good knowledge of housing benefit, she was unaware of the rules regarding notional capital. 

8.     Finally, as pointed out by Judge Mesher when giving permission to appeal, the observations relied on in CJSA/1425/2004 were not borne out by the passages relied on there in R(SB) 38/85 and R(SB) 40/85 and that the decision was disapproved of by another Commissioner in CH/264/2006.  I agree with the criticism of CJSA/1425/2004 in that last case.  While I note the comments in JM v Secretary of State for Work and Pensions [2010] UKUT 145 (AAC) that “A person who knows of the capital limit must be taken to realise that benefit may be payable if he or she disposes of capital above that limit and to intend that consequence if the expenditure is unreasonable”, it does not appear to me that such presumed intention is the same as purpose.

9.     There are many litigants in the courts who run what they should realise are hopeless cases and inevitably end up paying large sums in costs to their own lawyers and to the other party.  There are others who embark on new businesses for which they lack adequate ability and financial awareness and which are as a result doomed to failure at considerable expense to the over-optimistic so-called businessman.  The actions of these litigants and businessmen are unreasonable and their expenditure and losses are the almost inevitable consequence of their unreasonable conduct.  It does not follow, however, that, just because they impoverish themselves in this way, even if they are aware of the existence of housing benefit and the capital limits, that they have deprived themselves of the capital which they have paid out and lost “for the purpose of securing entitlement to housing benefit”.  So too, a person who donates a kidney to a relative does not do so for the purpose of putting their life at risk under the knife even though they know that that is the consequence of their decision.

10. The test is one of purpose, and the obtaining of benefit should form a positive part of their planning.  If a claimant tries to explain an action in an unreasonable way, that casts doubt on his credibility and can lead to the tribunal concluding that his motivation was different from that which he puts forward.  It can also lead the tribunal in appropriate cases to conclude that obtaining housing benefit may also be a purpose, that is an objective to be desired as part of the planning, even if not the dominant one.

11. There are, however, other possibilities to explain apparently unreasonable conduct.  The claimant may simply have made an unreasonable judgment about some aspect of the steps he was taking or their consequences, or although knowing of housing benefit, he may just not have thought about it.  If he has not thought about it, then he cannot, in my judgment, have acted for the purpose of obtaining the benefit.  A tribunal is quite capable of deciding on the evidence whether any such assertion by a claimant is to be believed and is not bound to presume a purpose that never existed.

12. In cases such as the present, the explanation may also lie in attitudes to property or personal relationships which the claimant cannot express or is inhibited for social or other reasons from doing so.  Here, whatever the motivation for giving away the flat, I fail to see how the predominant motive can be to obtain assistance in paying for something that would not call to be paid for if the flat was retained.  Once the obtaining of housing benefit is dismissed as the predominant motive for the gift, and without the true predominant motive being ascertained, it is difficult to see on what basis it can be said that the obtaining of housing benefit was a planned consequence of the gift, especially bearing in mind that the only reason the claimant gave up free accommodation at the flat was that her sister made her leave after they fell out.  On the other hand, the claimant does not appear to have been totally frank with the council or the tribunal in relation to the motive for the gift or the employment of her husband and the reason for this will need to be considered by the new tribunal.

13. I find the reasoning of the tribunal to be defective in law, and I must set aside its decision and remit the matter to a new tribunal.  I express no view as to the likely outcome of the new hearing.

(signed on the original) Michael Mark

Judge of the Upper Tribunal

23 December 2011