Upper Tribunal (Administrative Appeals Chamber)

 

IN THE UPPER TRIBUNAL Appeal No: CH/2911/2013

 

ADMINISTRATIVE APPEALS CHAMBER

 

Before: Upper Tribunal Judge Wright

 

 

DECISION

 

 

The Upper Tribunal allows the appeal of the appellant.

 

The decision of the First-tier Tribunal sitting at Aldershot on 5 March 2013 under reference SC167/12/01086 involved an error on a point of law and is set aside.

 

The Upper Tribunal is not in a position to re-decide the appeal. It therefore refers the appeal to be decided afresh by a completely differently constituted First-tier Tribunal and in accordance with the Directions set out below.

 

This decision is made under section 12(1), 12 (2)(a) and 12(2)(b)(i) of the Tribunals Courts and Enforcement Act 2007

 

DIRECTIONS

 

 

Subject to any later Directions by a District Tribunal Judge of the First-tier Tribunal, the Upper Tribunal directs as follows:

 

 

(1)            The new hearing will be at an oral hearing

 

(2)           The respondent is reminded that the tribunal can only deal with his situation as it was down to 19 December 2011 and not any changes after that date.

 

(3)           If either party has any further evidence that they wish to put before the tribunal that is relevant to the capital value of the property in Spain, or the reasonableness of extending the period of any capital disregard, as at December 2011, this should be sent to the First-tier Tribunal’s office in Sutton within one month of the date this decision is issued.

 

(4)           The First-tier Tribunal should have regard to the points made below.

 

 

 

REASONS FOR DECISION

 

 

Relevant background

 

 

1.                This appeal is about capital held abroad (in Spain) and the inter-relationship between the provisions in the Housing Benefit (Person who have attained the qualifying age for state pension credit) Regulations 2006 (“the HB Regs”) that allow for disregarding of capital and the provisions in the HB Regs which relate to valuing such capital. It also contains a salutary reminder about what ought not to be recorded on the First-tier Tribunal’s record of proceedings.

 

2.               The relevant facts may be stated very shortly. The respondent in this appeal to the Upper Tribunal (who I will refer to from now on as the “claimant”), had in 2008 bought a property in Spain with a view to retiring to live in it. However, the claimant and his wife were not able to continue living in the property in Spain, mainly for health reasons, and so returned to live in the UK.  They then put the properly in Spain on the market to sell.  This more or less coincided with what is sometimes referred to as the credit crunch or the world wide recession, which by all accounts has had a particularly negative impact on the Spanish property market. The result of this was that the claimant was unable to sell the Spanish property, despite a number of reductions in the asking price over a number of years.  For present purposes I need say no more than that the local authority by its decision of 19 December 2011 decided that it was no longer reasonable to continue to disregard the capital value of the Spanish property. This had the effect that the claimant was not entitled to housing benefit, because the capital value of the Spanish property exceeded the maximum £16,000 allowed under the HB Regs.

 

 

3.               The claimant appealed this decision to the First-tier Tribunal, which heard and decided the appeal on 5 March 2013 (“the tribunal”).  The basis of the decision under appeal was as set out above: the capital disregard found in paragraph 7 in Schedule 6 to the HB Regs no longer applied.  It is important to emphasise, for reasons which will become apparent, both the basis of the decision and what was then raised by the CAB on the appeal against the decision.  In its letter of 12 January 2012 seeking a review of the initial decision the CAB said that the claimant and his wife “….accept that the property they own in Spain must be treated as capital for the purpose of benefits, but they feel they have done as much as is possible to try and sell it…” and concluded the letter  asking the local authority to reconsider its decision “and reinstate my clients benefit award, for a further reasonable period, in order that they can reduce the property price further and hopefully secure a sale”. 

 

4.               A further similar letter from the CAB, dated 21 February 2012, elicited a response from the local authority that began “….[your clients] have requested an internal review of the decision not to disregard the capital value of the property in question”; and the letter went on to uphold the original decision. After some further correspondence, an appeal was brought against the decision of the local authority in which the grounds of appeal given were that “…[the local authority has not properly exercised its discretion to extend the period of the disregard of the property beyond 26 weeks. The rule states that a property can be disregarded beyond 26 weeks if the circumstances are exceptional.  We believe our circumstances are exceptional in that [and then reasons are given] ….We are asking for the 26 week period of disregard to be extended to allow us to continue to try to sell our property”.

 

5.               The tribunal allowed the appeal but, importantly, not on the basis of the issue under appeal.  On the issue of the application of the capital disregard under paragraph 7 in Schedule 6 to the HB Regs, it upheld the decision of the local authority, agreeing “that it is unreasonable to further extend the disregard period”[1]. Its basis for allowing the appeal was that the property in Spain had no value as a capital asset. 

 

Decision and reasoning

 

6.               I allow this appeal made by the local authority from the decision of the First-tier Tribunal dated 5 March 2013 (“the tribunal”) because in my judgment the tribunal erred in law in two respects in coming to its decision.

 

Appearance of predetermination

 

7.               The first error of law was, I hope, an unusual usual one (though regrettably I have come across other First-tier Tribunals making the same error) and concerns the tribunal, on the face of it, setting out before the appeal hearing had begun its decision that the appeal was to be allowed (see page 113 “Appeal allowed”). It is possible that this entry may in fact have been made by the tribunal after it had heard from all the parties and considered the evidence; though if that was the case then the words on page 113 ought to have appeared at the end of the record of proceeding (if they needed to be provided on the record of proceedings at all).  But looking at the record of proceedings in a normal sequential manner certainly gives rise to the reasonable appearance that the tribunal had allowed the appeal before it had conducted the hearing of the appeal.

 

8.               It is often said – but the importance of the point is not diluted by its repeated saying – that justice must not only be done but be seen to be done.  Looking at the record of proceedings in my judgment gives rise to the appearance that the tribunal had formed a decided view on the appeal before it had begun the hearing of the appeal. Such predetermination, or more accurately the appearance of predetermination, means that the decision arrived at is vitiated by error of law.

 

9.               The First-tier Tribunal should avoid making any notes of its decision (or the discussion that led to the decision – that should be left to any judicial notebook) in the record of proceedings. The decision should be left to the decision notice, which will have to be typed up on the day in any event.

 

10.            The respondent (the claimant) has not commented on this ground of appeal after I had raised it as a possible concern when I gave permission to appeal.  The appellant (the local authority), however, does comment. It says that the recording of “appeal allowed” was an error “and it does not seek to raise an argument on this point”.  This in context could mean one of two things.  The context is what I said when I gave directions on the appeal on 9 October 2013. On this issue I said:

 

“A separate error of law may be suggested by the First-tier Tribunal Judge having recorded “appeal allowed” in the record of proceeding (page 113) before he had heard from the parties.  That, arguably, may give rise to an appearance of the Judge having pre-determined the appeal; though his conduct thereafter (as to which the parties who appeared before him should be able to attest to) may militate against any such appearance argument”

 

In this context the local authority may be saying either that it doesn’t want to take this error of law argument or that it doesn’t want to argue that the error is saved by the conduct of the tribunal in hearing the appeal thereafter. 

 

11.             Given the other error of law I am now to turn to, which at least gives the appearance that the tribunal may have taken another point against the local authority which was not raised by the appeal, I consider that this first error is a material error of law regardless of whether the local authority wished to press for it or not.

 

 

Deciding appeal on basis of an issue not raised by the appeal

 

12.            The second material error of law concerns the basis on which the tribunal allowed the claimant’s appeal. For this the context is again important.  From the documents referred to in paragraphs 3 to 4 above it is apparent that the sole issue under appeal to the tribunal was whether the capital value of the claimant’s property in Spain could be subject of a further capital disregard under paragraph 7 of Schedule 6 to the Housing Benefit (Person who have attained the qualifying age for state pension credit) Regulations 2006 (“the HB Regs”).  This provides for a disregard of the capital value of:

 

“Any premises where the claimant is taking reasonable steps to dispose of the whole of his interest in those premises, for a period of 26 weeks from the date when he first took such steps, or such longer period as is reasonable in the circumstances to enable him to dispose of those premises”.

 

 

13.            Although I have not received argument on this point, it seems from the terms of regulation 44(2) of the HB Regs that the proper approach dictated by the legislation is to disregard (or at least consider disregarding) capital under Schedule without determining what its capital value is, rather than determining  the capital value and then considering the capital disregards only if is above £10,000 or £16,000 (the two relevant points at which capital affects entitlement to housing benefit for those who have attained the qualifying age for state pension credit). I say this because what regulation 44(2) provides for is that “[t]here shall be disregarded from the calculation of the claimant’s capital under paragraph (1) any capital, where applicable, specified in Schedule” (my underling added for emphasis).   In other words, the disregards are to be applied (if applicable), before the value or the amount of the capital is calculated. 

 

 

 

14.            This is an important consideration in this appeal - though in many cases it may be immaterial which step is taken first - because as I have already said the issue the local authority had decided and which was under appeal to the tribunal was whether a longer period of disregard under paragraph 7 of Schedule 6 to the HB Regs was reasonable to enable disposal of the premises, and in coming to that decision the local authority therefore had no need to first decide what the capital value of the home in Spain was. Further and in any event, there is nothing in the documents or appeal letters put before the tribunal by the CAB on behalf of the claimant that argued either (i) in the alternative that the property in Spain had a nil value, or (ii) if the disregard did not apply and so valuation then arose, the property had a nil value. At best, as far as I can see from the record of proceedings the issue of valuation may only have been raised as an afterthought at the hearing. Much of the proceedings were in fact taken up with issue of whether the ‘reasonable’ test under paragraph 7 in Schedule 6 was justiciable before the First-tier Tribunal on appeal (to which I return at the end of this decision).

 

15.            Moreover, even the statement of reasons characterises the issue (singular) before the tribunal as being whether the disregard could be extended (see page 120) and then immediately refers uncritically to the relevant law being (only) paragraph 7 of Schedule 6 to the HB Regs.  Additionally, paragraph seven of the statement of reasons indicates that even at the tribunal hearing the local authority was concentrating its case on the reasonableness of the extension of the period of the capital disregard alone.  As the tribunal put it:

 

“The Tribunal understands from the Presenting Officer’s presentation and the Respondent’s written submission that although they may question whether [the claimant] has pitched his asking price at a realistic level, their real point is centred on the legislation referred to above”

 

 

 

16.            It is clear that the issues that arise under paragraph 7 in Schedule 6 to the HB Regs and in respect of the capital value of an unoccupied property (whether in the UK or aboard) may be intertwined.  For example, the longer it takes someone to sell a property may be evidence of it being difficult to sell and thus of it having a lesser value or no value at all. However, my concern here is whether both parties to the appeal had an adequate opportunity to address this issue at the hearing; the issue prior to the hearing being solely whether or not it was reasonable to extend the period of the disregard. 

 

17.            In my judgment the local authority did not have an adequate opportunity to address this issue. I say this because on the basis of the above chronology it is evident that (i) the market valuation of the property in Spain was not being put in issue in the written documents on the appeal, (ii) the local authority had evidently not turned its mind to this issue (for example, by seeking its own valuation of the property’s value) before the hearing date, and (iii) it seemingly was not really able to make any meaningful submissions on this issue at the hearing because it, so to speak, had been taken by surprise.

 

18.            This it seems to me is a better point than the one the local authority sought to argue when first seeking permission to appeal from the First-tier Tribunal, which essentially was to argue that the tribunal’s decision was perverse.

 

19.            However, even there I consider one of the grounds of appeal has a related merit.  The tribunal found as a fact that “the property may have a value on the closed market, i.e. to a speculative investor.  However, the tribunal has no evidence of any such negotiations and by their very nature there is no notional value which can be put against the property unless and until a proposal is put to [the claimant and his wife]”. Like the local authority, I struggle to understand what the tribunal meant here. Calculating the value of a capital asset depends upon assuming a willing buyer and a willing seller: see R(SB)57/83 and R(SB)6/84[2]. It is not dependent on offers in fact being made.  It may be the case in carrying out the valuation exercise that there is little or no evidence of offers in fact being made, however that does not mean that unless an offer is made no value can be ascribed to the property.  For example, no offers may have been made because the property is considered to be overpriced.

 

20.           Of more importance, however, the findings of the tribunal set out in the immediately preceding paragraph highlight that the tribunal could have been assisted by being provided with further evidence on this issue. For example, the local authority may have been able to provide expert evidence as to what value, if any, the Spanish property may have been able to have been sold for as at the date of the decision under appeal so as to able to identify its then current market value: (R(SB)6/84). The fact that the asking price had been reduced from 180,000 euros in 2010 to 100,000 euros in or about June 2012, with no offers being made, does not necessarily mean that it had a nil value (or even a value of less than £10,000) in December 2011.  For example, and I stress this is only an example, could it have sold if it had been marketed at 50,000 euros in December 2011?  The effect of the tribunal taking this point only at the hearing, and contrary to the focus the appeal had had up until then, was in my judgment to unfairly deny the local authority the opportunity to properly address this issue.

 

 

 

21.            I am not by this seeking to say that a party to an appeal can always rely  on not being prepared to deal with an issue as a reason for the appeal being adjourned or it being materially unfair if it this does not occur.  Adjudicating on what is, or was, fair will always depend upon the circumstances of each case.  Each party, and especially professional representatives (such as a local authority), ought always to be prepared to deal with the issue or issues arising on the appeal, and choosing not to attend the hearing will usually not alter this. Moreover, in some cases the parties (if in attendance at the hearing - as was the case here), may be able to deal with a new issue that arises at the hearing (e.g. if it is a short piece of evidence or straightforward issue of law).  However, in this appeal the focus of the appeal shifted only at the hearing and the issue that then arose was one on which further evidence may well have assisted the decision on that issue. To deny the local authority the opportunity to address this issue by seeking such evidence was unfair, and the tribunal thereby erred in law.

 

22.           In giving directions on the appeal I asked:

 

“was whether that property had any capital value at all an issue on the appeal? If so, how and when did it arise? And if and when it did arise, were the parties to the appeal given sufficient opportunity to address the issue?”

 

23.           In response the local authority have said (page 162) that it was only during the hearing that the representative for the claimant made submissions asking the tribunal to also consider the value of the property in Spain and that the tribunal Judge did not seek the view of the local authority presenting officer as to its value.  It also (page 163) takes issue with the tribunal’s statement in its Decision Notice on page 118 that it was always open to it to seek an independent valuation and they had not done so, arguing that in its view it had no need to do so as the value of the Spanish property had not been an issue on the appeal until the hearing. The local authority points out, for example, that the claimant had indicated the Spanish property’s value to be 120,000 euros on the application form for benefit and that it was being marketed for 100,000 euros in June 2012, which must be some evidence of its then perceived market value.

 

24.           The CAB in the claimant’s response to these points argues (page 172) that the local authority has been aware since November 2011 that the Spanish property “is unsellable”.  However, for the reasons I have endeavoured to set out above, it seems to me that even if this is so, this does not show that before the hearing the appeal was also being argued on the clear basis that the property had a nil value.

 

25.           I emphasise that I am not saying that the Spanish property did not have a nil current value as December 2011, nor am I saying that it did then have a nil value. What I am saying, however, is that the process by which the tribunal arrived at its conclusion on this issue was flawed.

 

26.           For these reasons, the tribunal’s decision dated 5 March 2013 must be set aside.  The Upper Tribunal is not in a position to re-decide the first instance appeal, nor would it be appropriate for the Upper Tribunal to adjourn making its decision so as to hold a hearing of the appeal, as the claimant seems to request, in order to determine whether the capital disregard ought to have been extended in December 2011 and/or what value the Spanish property then had. Those issues are better determined at a local hearing before the First-tier Tribunal at which the claimant, his wife and the local authority can all attend.

 

27.            The appeal will therefore have to be re-decided by a completely differently constituted First-tier Tribunal (Social Entitlement Chamber).  The local authority’s success on this appeal to the Upper Tribunal on error of law says nothing one way or the other about whether the claimant’s appeal will succeed on the facts before the First-tier Tribunal, as that will be for that tribunal to assess in accordance with the law and once it has properly considered all the relevant evidence.

 

28.           In remitting the appeal back to the First-tier Tribunal it may be necessary to rule on one other matter that may still be a live issue. This concerns the argument of the local authority that an appeal on whether it is reasonable to extend the period of paragraph 7, Schedule 6 disregard is either not justiciable at all or may only be so on judicial review grounds.  I emphatically reject that argument.  The case-law of the social security commissioners and the Upper Tribunal has long held that the appeal to the First-tier Tribunal is on facts on and the law, and that the tribunal on the appeal stands in the shoes of the first instance decision maker, exercise al the powers that decision maker hold, and thus decides the issue on the appeal completely afresh including all factual matters and exercises of discretion: see R(IB)2/04, R(H)1/08, R(H)6/06, R(IS)7/01, CIS/4757/2003, CIS/6908/1995 and SP –v- SSWP [2009] UKUT 255 (AAC). Given this and given the lack of anything prohibiting such an appeal in the Schedule to the Housing Benefit and Council Tax Benefit (Decisions and Appeals) Regulations 2001, the argument of the local authority cannot be sustained. It is simply wrong.

 

 

 

 (Signed) S. M. Wright

Judge of the Upper Tribunal

 

Dated 31^st January 2014