DECISION OF THE UPPER TRIBUNAL

(ADMINISTRATIVE APPEALS CHAMBER)

 

The DECISION of the Upper Tribunal is to dismiss the appeal by the Secretary of State.

 

The decision of the Birmingham First-tier Tribunal dated 18 August 2011 under file reference SC024/11/04218 does not involve an error on a point of law. The First-tier Tribunal’s decision stands.

 

This decision is given under section 11 of the Tribunals, Courts and Enforcement Act 2007.

 

 

REASONS FOR DECISION

 

The issues in this appeal

1. This appeal is about the proper calculation of the claimant’s entitlement to state pension credit (SPC), and in particular the assessment of SPC eligible housing costs where service charges are payable on a flat in a retirement complex. At the risk of some over-simplification, the principal issue concerns the attribution of service charges as between, on the one hand, accommodation costs (which qualify for SPC) and, on the other, supported living costs (which do not qualify for SPC purposes but may be met under the social services “Supporting People” programme). 

 

2. The appellant before the Upper Tribunal is the Secretary of State for Work and Pensions. He appeals against the decision of the First-tier Tribunal (FTT) which was in favour of the claimant, an elderly lady of 97. On one level the issue is simple – should SPC cover 15% of her service charge bill for 2010/11 (as the Secretary of State argues) or 51% of that cost (as is argued on her behalf).

 

3. However, this appeal is also something of a test case, or at the very least a lead case. The claimant lives in a development operated by Retirement Security Limited (RS Ltd), who have a total of 32 such complexes around the country with some 1,600 residents, of whom 240 have SPC awards. RS Ltd is aware of some 16 other related appeals pending before the FTT. However, there will doubtless be other retirement home providers with many other residents who may also be affected.

 

The oral hearing before the Upper Tribunal

4. I held an oral hearing of this appeal in London on 28 November 2012. The Secretary of State was represented by Mr Matthew Sabey of the Solicitor’s Office. The claimant (and respondent on this appeal) was represented by Mr Jim Tindal of Counsel. I am grateful to them both for their submissions.

 

5. The claimant herself, understandably, was not present. However, the hearing was attended by Mr R Bessell, the Chairman of Retirement Security Limited, who has acted as her representative throughout. I simply acknowledge that it is clear from the file that he has worked tirelessly (over a number of years) on behalf both of the claimant and other residents in a similar position.

 

The background to this appeal

6. The claimant lives in a flat in a RS Ltd complex in the West Midlands designed for independent but supported living. She owns her flat on a long leasehold. The management company for the complex in question (“PCL”) devise an annual budget for the service charge which is then split between residents on a monthly basis. The managing agent is RS Ltd. The annual PCL service charge budget for 2010/11 was in total £237,046, or £411.54 per month for each of the 48 residents. In very crude terms, this budget can be classified under four heads (or at least it was so divided in the Department’s matrix used for assessing SPC entitlement): staff salaries (approximately £140,000), administrative and general costs, including communal utility bills (£42,000), the reserve fund (£25,000) and other buildings and property-related costs (e.g. lift maintenance, gardening, totalling some £30,000). Also, and as noted above in very broad terms, SPC meets the accommodation element of the service charge, but not those costs relating to the support of residents.

 

7. The Secretary of State’s decision maker decided on 15 March 2011 that the eligible amount of such housing costs for the claimant was £14.77 a week or £767.75 a year (or, on my arithmetic, £63.98 a month). This actually represented a slight decrease on an earlier assessment that the eligible housing costs were £15.90 a week. The decision maker took the view that RS Ltd had not provided a full breakdown of (i) the number of hours worked by staff, (ii) the weekly duties of staff and (iii) the future uses of the reserve fund. The decision maker accordingly deducted from the service charge (a) the manager’s salary; (b) the duty managers’ salaries; (c) the housekeeping assistants’ salaries; (d) the sleeping in allowance; and (e) the future maintenance fund.

 

8. Putting the matter the other way around, the decision maker allowed about 15% of the annual service charge, representing  most but not quite all of the buildings and property-related costs relating to lift maintenance, the fire alarm, gardening, repairs, window cleaning and buildings insurance. This ratio of 15% was also applied to the administrative and general costs, including communal utility bills. Everything else – notably staff costs – was found to be ineligible in full.

 

9. The claimant, with the support of Mr Bessell, argued that the proper amount was £54.21 a week or approximately 51% of the annual service charge. The letter of appeal referred to the decision of Mr Commissioner Angus in CIS/2901/2004 (later reported as R(IS) 2/07) and the Decision Makers Guide (DMG) Letter 11/05, giving decision makers guidance in 2005 on the implementation of that decision in similar cases.

 

The hearing before the First-tier Tribunal

The papers before the FTT

10. The papers before the FTT included a submission by the Secretary of State on behalf of the decision maker, copies of some letters and calculations from the Pension Service as well as detailed correspondence from Mr Bessell, including the PCL service charge budget for 2010/11 together with a grid (“the attribution grid”) explaining how the various component elements had been allocated to either Pension Credit or Supporting People (or neither).

 

11. The FTT also had the benefit of a 4-page written submission from Mr Bessell, explaining the basis for the claimant’s appeal. Mr Bessell referred to decisions by the Social Security Commissioners on various cases, several of which had concerned other developments operated by RS Ltd. He also referred to correspondence which he had had with the Department in 2005 which had led to an agreed outcome on the benefit awards concerned. His very thorough submission included a total of 17 separate Appendices, each carefully referenced and summarised in his covering 4-page submission, (Commissioners’ decisions, previous correspondence, DWP Circulars, a previous FTT decision, etc), running to just over 80 pages in all. Mr Bessell’s submission was received by Her Majesty’s Courts and Tribunals Service (HMCTS) on 19 July 2011.

 

The FTT hearing

12. The claimant’s appeal was heard in Birmingham by Regional Tribunal Judge (RTJ) Rhead three weeks later on 11 August 2011. The Judge was present. Mr Bessell was present, representing the claimant, accompanied by Mrs S, one of his managers. The Secretary of State’s representative did not attend. The Judge’s record of proceedings noted “Dept indicated they are not attending. In view of civil disturbance agreed to start early.” I simply note that there were widespread riots in major cities during the previous week, and that on the previous day in Birmingham, not far from the tribunal venue, three local men had been killed in a hit-and-run incident which attracted considerable publicity.

 

13. I should here correct one matter. At the Upper Tribunal oral hearing I was under the clear but mistaken impression that a presenting officer had not attended due to the rioting in Birmingham. I apologise to both advocates if I inadvertently misled them in any respect on that point. Mr Mabey very fairly said that the Secretary of State was not taking issue with the FTT’s decision on the day to proceed with the hearing. That concession was very wise, not least as on closer examination of the HMCTS administrative file I see that the Pension Service had indicated at the outset that a presenting officer would not be attending the hearing.

 

14. Be that as it may, RTJ Rhead observed that Mr Bessell’s submission had been received by HMCTS on 19 July and issued to the parties, remarked that “it is not clear what notice the Pension Service had of the submission”, but decided to proceed in any event, given the claimant’s advanced years and the need to deal with the case promptly. Again, I have the advantage of being able to scrutinise HMCTS records which show that the submission was sent out on 21 July. In other words, the Pension Service had the submission for a fortnight or so before the hearing. At the hearing RTJ Rhead heard submissions from Mr Bessell and evidence from Mrs S.

 

The FTT’s decision

15. The FTT allowed the claimant’s appeal and set aside the decision of 15 March 2011. RTJ Rhead concluded that the claimant was entitled to £54.21 a week by way of SPC eligible housing costs. In his decision notice he recorded that Mr Bessell’s detailed written submissions had been confirmed at the oral hearing. Moreover, “the Pension Service have not produced any persuasive evidence to challenge these figures which are credible, well argued [and] supported by strong evidence and analysis”.

 

16. RTJ Rhead also issued a full statement of reasons. He set out the background to the appeal and the issues to be decided. The central paragraph in his reasoning ran as follows:

 

“12. I was convinced by the documentary evidence produced by RS Ltd in respect of the eligible housing costs. Much of what they produced in the bundle (p.59-p.119) was not strictly relevant to this appeal. However what was relevant was detailed calculations of apportionment going back to 2005, but more particularly the PCL budget for 2010-11 (at p.94-p.95). I was satisfied that these service charges were eligible. The Pension Service has barely challenged the issue of eligibility. I was also satisfied with the apportionment (p.95). I took into account the Tribunal’s duty of enquiry, but on the facts there was very little to challenge in the budget of 2010/2011 and apportionment (see p94 and p95). This was strong prima facie evidence of eligible costs. Further, and in addition to this, Mrs S attended to give oral evidence. The oral evidence was that the budget was correct, and calculated on well accepted accountancy principles and the apportionment was based upon, for example, the various workers’ job descriptions. Mrs S gave examples at the oral hearing as to how this was calculated. So for example she explained that the duty manager’s time was analysed by reference to tasks set out in her job description. She was then able to point to the relevant document which dealt with this (p.85). Although this related to 2005, there had been no change in the job descriptions and employees’ tasks and functions. It was all carefully documented and recorded. It may have been fabricated or concocted, but I thought that to be extremely unlikely. There may have been some mistakes and some of it may have been subject to estimates. However I could not identify any mistakes and any estimates seem to be based upon reasonable assumptions and inference. I find it difficult to see what else RS Ltd could have done in order to establish the correct amount of service charges in respect of housing costs.”

 

The proceedings before the Upper Tribunal

17. RTJ Rhead subsequently gave the Secretary of State permission to appeal. The parties’ submissions on the appeal can be summarised thus.

 

18. The Secretary of State’s original representative (Mr Roger Jennings) has made a written submission arguing, in summary, that the FTT had misinterpreted the Commissioners’ case law with regard to the assessment of eligible service charges and had failed to undertake a sufficient analysis of the evidence in this case. A number of examples were given where it was said that the FTT had both misapplied the relevant law and failed to analyse the evidence with sufficient rigour. Mr Mabey developed those arguments at the oral hearing before the Upper Tribunal. In short, he submitted that the FTT had misunderstood the import of the Commissioners’ case law on the question of eligible housing costs for such service charges. For example, it was said that the FTT had misapplied the methodology laid down in R(PC) 1/07. Furthermore, there was inadequate evidence before the FTT and moreover the tribunal’s conclusions as regards the attribution of the various elements of the service charge budget to accommodation and non-accommodation costs respectively were inherently improbable, indicating that the facts were not properly investigated. The appeal should accordingly be allowed and the matter remitted for full fact-finding by a new tribunal.

 

19. Mr Tindal, for the claimant and respondent, in a robust response at the oral hearing, was having none of this. In his submission, the Secretary of State had not attended the FTT hearing but was now seeking, under the guise of an appeal limited to errors of law, to re-argue factual issues that had been properly dealt with by the FTT. The Secretary of State, he argued, was trying to have a “second bite of the cherry” – the various matters raised in the grounds of appeal could have been challenged before the FTT but were not. It was simply too late to do so now. Furthermore, and in any event, the grounds of appeal demonstrated a misunderstanding both of the evidence before the FTT and of the relevant case law. In his submission, given the issues in dispute before the FTT, RTJ Rhead had exercised his inquisitorial function appropriately and had reached conclusions which were eminently sustainable on the evidence before him (which, of course, included the oral evidence of Mrs S as well as the detailed documentary submission by Mr Bessell). On one point of law, however, Mr Tindal sought the guidance of the Upper Tribunal (I return to this matter later).

 

The Upper Tribunal’s analysis

The relevant legislation

20. SPC, payable under the State Pension Credit Act 2002, is a means-tested benefit which can include an allowance for a person’s expenses as an owner occupier. Thus a person’s “appropriate minimum guarantee” (see section 2 of the 2002 Act) can include a sum in relation to their housing costs (State Pension Credit Regulations 2002 (SI 2002/1792), regulation 6(6)(c)). Such housing costs are calculated according to the detailed rules set out in Schedule II to the 2002 Regulations. They include, under the rubric of “other housing costs”, amounts in respect of service charges (Schedule II, paragraph 13(1)(b)).

 

21. The inclusion of service charges is not open-ended. Those amounts which are ineligible for the purposes of housing benefit awards are to be deducted. To be precise, according to paragraph 13(2)(b), the following sums are to be deducted (emphasis added):

 

“where the costs are inclusive of ineligible service charges within the meaning of paragraph 1 of Schedule 1 to the Housing Benefit (General) Regulations 1987 (ineligible service charges) the amounts attributable to those ineligible service charges or where that amount is not separated from or separately identified within the housing costs to be met under this paragraph, such part of the payments made in respect of those housing costs which are fairly attributable to the provision of those ineligible services having regard to the costs of comparable services;”.

 

22. I note that there have been no material amendments to paragraph 13 since 2002. I do not need to set out in full what is now paragraph 1 of Schedule 1 to the Housing Benefit Regulations 2006 (SI 2006/213). Ineligible service charges can be summarised as including costs relating to various matters such as day-to-day living expenses (paragraph 1(a)), counselling and other support services (paragraph 1(f)) and, more generally, “any services… which are not connected with the provision of adequate accommodation” (paragraph 1(g)).

 

23. Mr Tindal accepts that the onus was on the claimant, through RS Ltd, to show that the claimed elements were eligible rather than ineligible service charges (R(PC) 1/07 at paragraphs 18-20). He acknowledged that in practice service charges fell into three possible categories – accommodation-related (and so eligible) charges and ineligible charges, which in turn might be funded through the Supporting People programme, and a small rump or residual category of “other” charges.

 

The relevant case law

24. Mr Tindal also helpfully set out four general propositions based on the extensive case law to date. I did not understand Mr Mabey to dissent from this analysis of the jurisprudence in any significant respects.

 

25. First, charges relating to maintenance, repairs, cleaning, lighting and other utility charges for communal areas and gardens are eligible without the need for specific evidence in an individual case about the extent to which such communal facilities are used (CIS/1459/1995, Appendix, paragraph 15).

 

26. Second, charges relating to contributions for a reserve fund, assessed by a surveyor to meet future maintenance or capital works are eligible and, in assessing how far they relate to accommodation costs, it may be relevant to consider the basis of the reserve fund in written agreements, past use or intended future works (CPC/968/2005 at paragraph 11, following CIS/667/2002 at paragraph 9).

 

27. Third, staffing costs that are fairly attributable to the provision of adequate accommodation must in principle be based on findings of fact as to what staff actually do at a particular development and not as a broad average of time devoted to different tasks across a range of locations where practices varied (R(PC) 1/07 at paragraph 22). However, if the developments are essentially similar in nature and the amount of time spent simply varied with the number of residents, it is legitimate to rely on evidence from other developments (CPC/977/2007 at paragraph 7); conversely if a particular development has some differentiating feature, then the appropriate adjustment to the “norm” should be made (CPC/985/2007 at paragraph 12). It is also legitimate to rely on evidence of the service charge, how much is met from the Supporting People programme and a manager’s statement as to the division of time between such support and accommodation matters, adopting a “broad approach” which may not attain the “gold standard” process set out in paragraph 28 of R(IS) 2/07 (R(PC) 1/07 at paragraph 23).

 

28. Fourth, and finally, other administration costs which cannot be neatly categorised as either accommodation or non-accommodation charges (e.g. telephones, audit, accountancy charges etc) have to be apportioned by the same ratio as eligible versus ineligible costs for the rest of the budget overall (R(PC) 1/07 at paragraph 8, citing with approval CPC/968/2005 at paragraph 11) and not simply by the staff costs ratio only (R(IS) 2/07 at paragraph 28).

 

The Secretary of State’s challenge to the First-tier Tribunal decision

29. I accept Mr Tindal’s principal submission that, for the most part, the Secretary of State’s challenge to the FTT’s decision is an attempt to re-argue the case on its merits. As he put the point forcefully in his response to the appeal, the Secretary of State “is using the appeal as a vehicle to put the cross-examination points they failed to put at the hearing and criticising the Judge for not taking points they didn’t take”. Mr Tindal pointed to the difficulty facing a party seeking to overturn, on an appeal confined to error of law, a decision taken on the facts (referring to my decision in Basildon DC v AM [2009] UKUT 113 (AAC) (at paragraphs 23-25), in turn citing the Court of Appeal’s decision in Braintree DC v Thompson [2005] EWCA Civ 178). The Secretary of State, he argued, was “trying to raise twiddly factual points that should have been raised below but weren’t”. I accept those submissions, and it is in any event axiomatic that the weight to be attached to any particular piece of evidence is quintessentially a matter for the fact-finding tribunal. As Rix L.J. explained in Fryer-Kelsey v Secretary of State for Work and Pensions [2005] EWCA Civ 511 (reported as R(IB) 6/05), it is not the function of appellate courts (and thus also the Upper Tribunal) “to set the appeal tribunal to rights by teaching them how to do their job of weighing the evidence” (at paragraph 25).

 

30. A few examples will suffice. According to the original application for permission to appeal, the FTT “erred in giving uncritical acceptance to assertions from the management about staff time which were either unsupported by evidence or inherently improbable”. Mr Mabey also sought to persuade me that the issue of the proper attribution of staff time had not been adequately addressed by the tribunal. Yet there was plenty of documentary evidence before the FTT – for the most part supplied (and conscientiously so) by Mr Bessell and the Judge also had the advantage of being able to question Mrs S on the day. Various other matters are said to be “inherently improbable”, but this challenge comes nowhere near the level required for a finding that the FTT’s decision was perverse or contrary to the evidence. Similarly, the further grounds of appeal argue that “the electricity figure in particular is very high and unlikely to be in respect solely of communal parts of the accommodation. This is another point that should be clarified”. As Mr Tindal put it, “an argument that the electricity bill is on the high side is not an argument about an error of law”. The Upper Tribunal regularly has to tell individual claimants that an appeal at this level is not an opportunity to re-run the case on the facts nor to raise points which were not raised below. What is sauce for the claimant goose is also sauce for the Secretary of State gander.

 

31. I should also record that at the oral hearing Mr Mabey very wisely conceded that the original challenge in the grounds of appeal in relation to the ‘sleeping-in allowance’ (an extra payment made to duty managers “sleeping over” on site and being on call) was not being pursued by the Secretary of State. Mr Tindal explained that this element was simply not part of the equation. The documentation before the FTT showed that, whilst in 2005 these costs were treated as 97% accommodation-related (with 3% attributed to support costs), in the present case the relevant costs had been wholly allocated to “support” rather than “accommodation”. Accordingly, they were not claimed for as part of SPC housing costs – hence the entry of “0%” in the column headed “% allowable” against “sleeping-in allowance” on the attribution grid, with the entire cost being set against “Supporting People”. The Secretary of State had simply misunderstood the evidence. Mr Tindal’s clarification was very helpful, but I simply observe, as he also argued, that it is not the role of an appeal on a point of law to clarify matters of fact.

 

32. I also agree with Mr Tindal that there were two matters in the Secretary of State’s grounds of appeal which do raise possible points of law. However, I further agree that neither matter gets off the ground, at least in terms of undermining the FTT’s decision, for the reasons he gives.

 

(i) The application of R(PC) 1/07: data from other retirement developments

33. The first matter is the Secretary of State’s argument that the FTT had failed to apply the principles in R(PC) 1/07 properly. The submission is that the FTT erred in law, contrary to the reasoning in paragraph 22 of R(PC) 1/07 (see paragraph 27 above), by relying on evidence from 2005 relating to a different development operated by RS Ltd. However, RTJ Rhead did not fall into the trap of unquestioningly “reading across” from the other development to the one in which the claimant lives. First, if the development and arrangements are similar, then such a read across is permissible in any event (see the observations by Mr Commissioner (now Judge) Lloyd-Davies in CPC/977/2007 at paragraph 7). Second, Mrs S gave evidence to the tribunal that what was true for the 2005 development was also broadly true for PCL (subject to some minor adjustments, e.g. the treatment of the sleeping-in allowance, as noted at paragraph 31 above). Furthermore, the FTT had expressly accepted the documentary evidence, as supplemented on the day by Mrs S (at paragraph 12 of the statement of reasons – see paragraph 16 above).

 

(ii) The tension between R(IS) 2/07 and R(PC) 1/07: general administrative costs

34. The second matter needs rather more attention. Mr Tindal made it clear that this was the reason that those instructing him had asked for an Upper Tribunal oral hearing, as there was, he argued, an urgent need for clarification of the relevant law.

 

35. I explained at paragraph 6 above that one of the four broad categories of costs within the overall service charge budget (as particularised in the DWP’s matrix) was the catch-all of “administrative and general costs”, amounting to some £42,000 a year in this case. The largest single element of this (some £19,000) was the management fee; other components included communal utility costs (e.g. electricity and gas), office expenses, telephone bills, audit and accountancy costs. The question then is how such costs should be allocated to “accommodation” and “support” purposes respectively. The case law of the former Social Security Commissioners on this point is not entirely consistent. For these purposes I put to one side for the present utility bills, also recognising of course that fuel costs are eligible service charges only insofar as they relate to “services for communal areas” (Housing Benefit Regulations 2006, Schedule 1, paragraph 5).

 

36. The ‘gold standard’ or ‘purist’ approach was set out by Mr Commissioner Angus in R(IS) 2/07 (known as CIS/2901/2004 before being reported), where he held (at paragraph 28):

 

“… The staff administration costs such as staff advertising, employers’ liability insurance and personnel management attributable to accommodation-related services should be calculated by applying to them the ratio of hours spent on accommodation services to hours spent on support services. That will be, I have little doubt, a very time consuming process for the management company.  If there is no empirical method of apportioning bank charges, stationery, postage, audit fee, accountancy charges and the management fee those costs should all be apportioned in the same ratio.”

 

37. What I might term the ‘silver standard’ or ‘pragmatic’ approach was set out by Mr Commissioner Lloyd-Davies in R(PC) 1/07, where he observed that:

 

“I accept that the process described by the Commissioner in paragraph 28 of CIS/2901/2004 may be described as the gold standard for assessing what proportion of charges is eligible or ineligible in cases such as these. Such evidence is clearly sufficient, but not in my judgment always necessary. In some cases it might be impossible for such evidence to be provided … I concur with the remark of the Commissioner in paragraph 9 of CPC/968/2005 that a ‘broad approach’ is called for: for example, a decision-maker or tribunal supplied with the terms of the lease relating to services and service charges, a breakdown of the service charges, details of what service charges (if any) are met by the Supporting People programme, and a statement from the scheme manager as to how his working time is usually divided up should normally be able to make a reasoned estimate of how much of the service charges in dispute is eligible or ineligible. Each case will, however, inevitably turn on its own facts and evidential requirements will vary.”

 

38. CPC/968/2005, relied on and approved in R(PC) 1/07, was a decision of Mr Commissioner Henty’s. The Commissioner there noted that counsel for the Secretary of State in that appeal had, in his detailed submissions, submitted “that the method in para 28 of CIS/2901/2004 should be adopted so far as staff costs were concerned for the reasons given by the Commissioner but [counsel] submits that it does not follow that the Commissioner was right as regards costs other than staff costs – indeed he was wrong”. Mr Commissioner Henty also quoted from the detailed written submission made on behalf of the Secretary of State in that appeal, dealing with how general administrative costs should be dealt with. This contended that a “time and motion” study, as was appropriate for staff time, would not be workable as regards general administrative costs. The Secretary of State’s submission had concluded:

 

“6. Consequently, I submit that the apportionment of management charges and audit costs should be arrived at by comparing the value in the accounts of the eligible and ineligible services provided for the residents and for which the service charge is raised. This would reflect the full range of services provided by the management company and provide a straightforward and comprehensive methodology that could be applied in all cases.”

 

39. The Commissioner concluded that he was “content to accept this as a proper basis for apportionment of these costs: indeed I can see no other fair and reasonable basis” (at paragraph 10).

 

40. At this point I should note that R(IS) 2/07 was decided in April 2005; CPC/968/2005 in October 2005 and R(PC) 1/07 in July 2006. In July 2005 – so after R(IS) 2/07 had been decided but before CPC/968/2005 – the Department had written to Mr Bessell about the implementation of Mr Commissioner Angus’s decision on the actual facts relating to the particular claimant concerned with that appeal. That decision letter applied the principles set out in paragraph 28 of R(IS) 2/07 to general administrative costs. As it had been agreed between the parties on that appeal that staffing costs were to be allocated 50:50, as between accommodation and support functions, it followed (applying R(IS) 2/07) that the same 50:50 split applied to these administrative costs. This agreement formed the background to DMG Letter 11/05.

 

41. In the present case, the attribution grid provided by Mr Bessell adopted the same approach, allocating the various general administrative costs on a 50:50 basis to accommodation- and support-related functions respectively. This was the basis agreed in 2005 following protracted litigation and extensive correspondence. It is no surprise that the attribution grid for the 2010/11 services charge budget for PCL took the same line. It seems to me that although there is no question of the Secretary of State being bound in 2011 by an agreed outcome on a similar case in 2005, Mr Bessell was entitled to proceed on the basis that that understanding remained valid. I do not think he can be criticised in any way for omitting to spot the twists and turns buried in the Commissioners’ subsequent jurisprudence.

 

42. The FTT’s adoption, by implication, of the same approach on this appeal is said by the Secretary of State’s representative, in his written submission, to be a “clear error of law”. Instead, the FTT should have adopted the approach preferred in CPC/968/2005 (and approved in R(PC) 1/07). I have to say that, perhaps understandably (for reasons that will become apparent), Mr Mabey made relatively little of this point at the oral hearing.

 

43. Mr Tindal, on the other hand, made hay. He agreed that CPC/968/2005 and R(PC) 1/07 set out the proper approach for dealing with the attribution of general administrative costs within service charge budgets. Thus these costs have to be apportioned on the same basis as the ratio of eligible versus ineligible costs for the rest of the overall budget. Arithmetically, this meant, he argued, that one had to (i) identify the aggregate general administrative costs; (ii) deduct that figure from the total service charge; (iii) calculate the percentage of eligible service charges in the balance; and (iv) apply that percentage (and not simply the percentage derived from considering staff costs alone) to the general administrative charges.

 

44. In the context of PCL’s 2010/11 service charge budget, the total service charge was £237,046. Within that total, the aggregate general administrative charges ran to £35,765 (having taken out the utility charges for the communal areas). The net service charge, taking out the administrative charges, was therefore £201,281. Again putting those charges to one side, the total of the eligible costs (with the utility bills taken back in at 100%) came to £120,206. That figure, as a proportion of £201,281, is 59.72%. If one therefore applies that ratio to the general charges of £35,765, one arrives at £21,358.86. That then has to be added to £120,206 to arrive at the total eligible charges of £141,564.86. With 48 residents, that results in a total for accommodation-related service charges of £56.72 per resident per week, slightly higher than the £54.21 claimed by Mr Bessell and awarded by the FTT.

 

45. In plain English, therefore, the error of law identified here by the Secretary of State on this second matter actually works (marginally) in the claimant’s favour when the necessary recalculations are done.

 

Conclusion

46. In short, I agree with Mr Tindal’s analysis. By adopting the attribution grid in its entirety, the FTT had inadvertently approved a treatment of the attribution of the general administrative costs which had mistakenly followed the approach taken in R(IS) 2/07. It failed to adopt, as it should have done, the more nuanced (and, I must say, more realistic) approach advocated in CPC/968/2005 and R(PC) 1/07. The latter is the better approach for the reasons identified in those later decisions. Mr Tindal made it clear that there was no cross-appeal on behalf of the claimant and that he was content for the matter to be left as it had been decided by the FTT, with the claimant’s allowable service charge being £54.21 a week for the purposes of SPC housing costs in 2010/11. He was only seeking the guidance of the Upper Tribunal on the inconsistency between R(IS) 1/07 and R(PC) 2/07 on this one relatively narrow point.

 

47. So did the FTT’s decision involve an error of law within the meaning of section 12(1) of the Tribunals, Courts and Enforcement Act 2007? I take into account the fact that both parties are agreed that there was a rather technical error in the approach to the attribution of the general administrative costs component of the overall service charge. I acknowledge Mr Tindal’s point about the absence of any cross-appeal, but remind him that this is an inquisitorial system. I therefore also bear in mind that it is the job of the benefits system (and by extension the tribunal system) to ensure that “so far as it can … everyone receives what they are entitled to, neither more nor less” (Gillies v Secretary of State for Work and Pensions [2006] UKHL 2 (R(DLA) 5/06 per Baroness Hale) at paragraph 41). Last but not least, I am also alive to the fact that a shortfall of £2.51 a week is a not inconsiderable amount to an elderly lady living on very restricted means, especially taken over the year as a whole.

 

48. On the other hand, I find a number of other considerations more compelling. In particular they include the fact that the 50:50 split was accepted by the Department’s decision makers in 2005, after much debate, and I doubt that the FTT should now be quick to go behind what was a carefully negotiated and informed agreement as to how to implement R(IS) 2/07. I also have regard to the fact that this is a highly complex area of the law and to argue that the point amounts to a “clear error of law”, as the Secretary of State suggested, is at best debateable. Furthermore, Baroness Hale qualified her statement of principle in Gillies by the words “so far as it can” – so, the system should strive for but will not always attain perfection. I also take into account the requirement that any error of law be material to the outcome. I am not satisfied that this is the case here. In an exercise as complex as this, where some costs can be quantified exactly, and other costs perhaps only on a rather more impressionistic or “broad brush” basis, the eventual figure arrived at for weekly eligible housing costs is going to be necessarily fuzzy at the edges, even if a precise figure is needed to feed into the overall SPC calculation. For example, in the course of argument Mr Tindal pointed to a couple of other factual errors in the calculation at the margins (albeit that the ones he identified both happened to assist the claimant). However, as RTJ Rhead noted in his reasoning,

 

“there may have been some mistakes and some of it may have been subject to estimates. However I could not identify any mistakes and any estimates seem to be based upon reasonable assumptions and inference. I find it difficult to see what else RS Ltd could have done in order to establish the correct amount of service charges in respect of housing costs.”

 

49. Taking all those matters into account, I do not think it is either right or proportionate for me to start unpicking the FTT’s decision, even to the extent of declaring it erroneous in law and then either (a) declining to set it aside or (b) re-making it in almost exactly the same terms, subject to the marginal uplift identified above in respect of the administrative costs element of the eligible service charges. Adopting either of those latter approaches would be an empty exercise in the circumstances of this appeal.  I therefore conclude that the FTT’s decision contains no material error of law.

 

One final observation

50. The claimant’s representative set out a detailed and compelling submission for the FTT hearing. In accordance with the general duty to co-operate with the FTT (see rule 2(4), he did not seek to ambush the Department at the hearing but sent in his paperwork in good time. The Secretary of State’s representative received a copy of that at least a fortnight before the hearing. His representative could have done one or more of at least three things. First, he could have filed a further submission. Second, he could have applied for a postponement on the basis that time was needed to respond in full to that submission. Third, he could have arranged for a presenting officer to attend on the day to ask for an adjournment and, if the application was unsuccessful, to question Mr Bessell and his colleague. The Secretary of State’s representative appears to have taken none of these steps. Perhaps the relevant official was on annual leave when Mr Bessell’s submission arrived – if so, then it is not unreasonable to expect the Secretary of State to have a system in place for dealing with such contingencies. This case is also further evidence, if such evidence be needed, of the added costs and inconvenience associated with the non-attendance of presenting officers at FTT hearings.

 

Conclusion

51. I conclude that the decision of the First-tier Tribunal does not involve any material error of law. I therefore dismiss the appeal by the Secretary of State  (Tribunals, Courts and Enforcement Act 2007, section 11). The FTT’s decision stands. 

 

 

 

 

 

Signed on the original Nicholas Wikeley

on 17 January 2013 Judge of the Upper Tribunal