DECISION OF THE UPPER TRIBUNAL

(ADMINISTRATIVE APPEALS CHAMBER)

 

The DECISION of the Upper Tribunal is to allow the appeal by the Appellant.

 

The decision of the Luton First-tier Tribunal dated 29 October 2014 under file reference SC914/13/04214 involves an error on a point of law. The First-tier Tribunal’s decision is set aside.

 

The Upper Tribunal is able to re-make the decision under appeal. The decision that the First-tier Tribunal should have made is as follows:

 

(1) The Appellant’s appeal against the Secretary of State’s overpayment decision of 17 October 2012 (based on the entitlement supersession decision of 10 October 2012) is allowed. The amount of £17,107.30 in income support for the period from 26 February 2002 to 30 August 2004 is not recoverable from the Appellant because the funds which it is alleged she failed to disclose were not her capital.

 

(2) The Appellant’s appeal against the Secretary of State’s revised overpayment decision of 8 May 2012 (revising the overpayment decision of 16 March 2011, which was in turn based on the entitlement supersession decision of 15 February 2011) is also allowed. The amount of £30,130.23 in income support for the period from 31 August 2004 to 16 August 2010 is not recoverable from the Appellant because the funds which it is alleged she failed to disclose were not her capital.

 

This decision is given under section 12(2)(a) and (b)(ii) of the Tribunals, Courts and Enforcement Act 2007.

 

 

 

REASONS FOR DECISION

 

The Upper Tribunal’s decision in summary

1.   I understand that the Appellant has literacy problems, so I shall keep this decision as short as possible. However, some detail is necessary to ensure the correct decision is implemented. The Appellant’s income support appeal to the Upper Tribunal is allowed. The decision of the Luton First-tier Tribunal, dated 29 October 2014, involves a legal error by the tribunal and is set aside. That tribunal’s decision is of no effect.

 

2.   The typical outcome for successful appeals before the Upper Tribunal (Administrative Appeals Chamber) is that the claimant’s original appeal needs to be re-heard by a new First-tier Tribunal. However, a tribunal re-hearing is not necessary in the particular circumstances of this case. I therefore both (a) allow the Appellant’s appeal to the Upper Tribunal; and (b) re-make the decision that the First-tier Tribunal should have made.

 

The background

3. This is one of two appeals by the Appellant from the First-tier Tribunal’s decision. The other decision is the state pension credit appeal under file reference CPC/741/2015. Much of what I say in this decision also applies to that decision. That other decision is simply the logical consequence of the decision on the present income support appeal.

 

4. In short, the Department for Work and Pensions (DWP) had decided that the Appellant was not entitled to income support for a period of some 8 years. It further decided she was liable to repay a large amount by way of a recoverable overpayment of that benefit. The DWP took the view that the Appellant had a substantial sum in capital which effectively disqualified her from receiving income support. The Appellant’s argument all along was that the money was not her money, but disability living allowance (DLA) which was payable to, and was being saved for, her two daughters.

 

5. The Appellant appealed to the First-tier Tribunal. Technically at various times the First-tier Tribunal (from now on, simply “the Tribunal”) had four separate appeals before it.

 

The First-tier Tribunal’s decisions

6. The Tribunal decided the first appeal was out of time as being made too late. This first appeal had related to the DWP’s decision that the Appellant was not entitled to income support for the period from 31 August 2004 to 16 August 2010. In summary, the Tribunal decided it did not have the legal power to hear that appeal as it had been made outside the absolute time limit of 13 months. There is no appeal against that Tribunal decision.

 

7. The Tribunal allowed the second appeal, deciding that the Appellant was entitled to income support from 26 March 2002 to 30 August 2004. The Tribunal concluded that over that earlier period the funds in question were being held by the Appellant on trust for her daughters. Accordingly, for that period, the money was not her money. There is no appeal against that Tribunal decision.

 

8. The Tribunal allowed the third appeal but in part only. In the Appellant’s favour, it decided that there was no recoverable overpayment of income support for the period from 2002 to 2004. This followed from its decision on the second appeal. However, the Tribunal dismissed the appeal against the overpayment for the later period from 2004 to 2010. In essence the Tribunal decided it was bound to accept that the funds in question were not held on trust by the Appellant for her daughters between 2004 and 2010. This was because there had been no effective challenge to the entitlement decision for that same period. This was, of course, itself because of the fate of the first appeal (see paragraph 6 above).

 

9. The fourth appeal was about the state pension credit claim made in 2013 and is covered in my other decision. It relates to a later period and is entirely consequential.

 

10. This decision is therefore in relation to the Appellant’s appeal against the Tribunal’s third decision, or at least that part of that decision that went against her.

 

The proceedings before the Upper Tribunal

11.   Mr Andy Malik, the Appellant’s law centre representative, argued that the First-tier Tribunal went wrong in law in two ways in relation to the income support decisions. First, he argued that the Tribunal had been wrong to assume it was bound by the fate of the unsuccessful challenge to the entitlement decision covering the 2004-2010 period. Second, he said the Tribunal had gone wrong in law by saying that the Appellant’s use of some of the daughters’ DLA savings to pay off rent arrears had converted the money into the Appellant’s own capital.

 

12. I gave permission to appeal, making the following observations:

 

‘9. The first ground of appeal is plainly arguable in the light of CIS/1330/2013 and my decision in Secretary of State for Work and Pensions v AM (IS) [2010] UKUT 428 (AAC). The FTT appears to have fundamentally misdirected itself on the relevant legal principles. The point was neatly summarised by Judge Wright in AM v Chelmsford BC (HB) [2013] UKUT 245 (AAC) at [47]-[49]:

 

“47. In CIS/1330/2002 Mr Commissioner Jacobs, as he then was, addressed it in the context of income support and a recoverable overpayment decision that followed a non-entitlement decision for a past period. The basis for each decision was that the claimant had too much capital to qualify for income support. The claimant appealed both decisions, though not at the same time.  The appeal tribunal dealing with the non-entitlement decision found that the claimant had excess capital and therefore upheld the Secretary of State’s decision. The appeal tribunal then dealing with the recoverable overpayment decision held that this excess capital finding of fact was binding on it and could not be re-opened. Following CIS/1263/2007, Commissioner Jacobs concluded the second tribunal had erred in law. The excess capital finding of fact was not binding on the second tribunal given the terms of section 17(2) of the Social Security Act 1998. Whether the claimant had excess capital was an issue of fact that the second tribunal had to investigate and make findings on in order to determine whether there was any overpayment, or at least a recoverable overpayment.

 

48. The decision of Mr Commissioner Turnbull (as he then was) in CIS/2540/2012 is to similar effect, though he was concerned with two notional capital decisions separated by a period of time. He decided that section 17(2) of the Social Security Act 1998 allowed to be re-litigated on the second appeal whether the claimant had deprived herself of capital (per regulation 51(1) of the Income Support (General) Regulations 1987), notwithstanding that the first tribunal had examined the exact same issue.  The said section 17(2) precluded an issue estoppel arising. 

 

…”

 

10. The second ground of appeal is also arguable. I must confess to having some problem in following the FTT’s reasoning at this point, in the passage in the latter half of [19], and especially the final sentence. The FTT states that the fact that the claimant used a substantial part of the funds to meet rent arrears “goes to strongly suggest that what was held on trust previously was subsequently ‘converted’ into capital by the Appellant’s actions.” This appears to conflate two quite separate concepts, namely (i) were the funds income or capital; and (ii) whose funds were they?

 

11. On an initial review it seems to me that at the point where money was withdrawn to meet rent arrears there were at least four possibilities (there may be more). First, this may be evidence that in fact the funds had all along belonged both legally and beneficially to the claimant, as she was using those funds to apply to such ends as she saw fit. Second, assuming that there had indeed been a trust, and the terms of that trust can be understood to include making proper provision for the children, then the claimant may simply have been acting in accordance with the trust by paying off rent arrears (although there may be issues here about e.g. the certainty or otherwise of the terms of the trust). Third, and again assuming that there had indeed been a trust, the claimant may have been acting in breach of that trust (although that would, in itself, be no concern of the DWP’s). Fourth, it may be that the claimant’s actions might be viewed in some way as terminating the trust (although this may take us into even deeper waters as to the circumstances in which an informal family-based trust can be terminated).’

 

13.   Mr R Atkinson, who now acts for the Secretary of State in these proceedings before the Upper Tribunal, supports this appeal. He also suggests that I should re-make the original decision under appeal in the Appellant’s favour.

 

14. Mr Andy Malik, for the Appellant, unsurprisingly agrees with that approach. 

 

The Upper Tribunal’s analysis

15. The Tribunal went wrong in law in two main ways.

 

16. Its first legal error was to assume, in effect, that it was bound to conclude that there was a recoverable overpayment of income support for the period from 2004 to 2010 simply because of the fate of the very first appeal against the relevant entitlement decision, which was not admitted as being out of time. The Tribunal regarded the Appellant’s entitlement status during that period as being effectively “off limits” and not open to challenge in the current appeal about the recoverability of the consequential overpayment. That approach was fundamentally flawed for the reasons identified in the case of AM v Chelmsford BC (HB) [2013] UKUT 245 (AAC), referred to above. Mr Atkinson relies, to similar effect, on the Social Security Commissioner and Upper Tribunal decisions in CIS/1330/2012 (also cited by Mr Malik when he applied for permission) and CJSA/2693/2009. The Tribunal judge in the present case said “there is nothing I can do about it”, but that was simply wrong. He could have looked at the trusts issue for that period from 2004 to 2010 afresh, and was not compelled to reach a particular factual conclusion simply because the DWP’s earlier entitlement decision stood unchallenged (see further Social Security Act 1998, section 17(2)).

 

17. The Tribunal’s second legal error was to assume that the fact that the Appellant had used some £10,000 of the funds in question to meet the family’s rent arrears in some way converted that money into the Appellant’s own capital. That was wrong as a matter of law, for the reasons helpfully explained by Mr Atkinson in his detailed written submission for the Secretary of State. I can summarise Mr Atkinson’s three main arguments briefly.

 

18. First, as the Appellant had been made an appointee by the DWP to act in benefit matters on behalf of her daughters, she was acting as a de facto trustee (i.e. a trustee in practice, if not technically in law). The role of trustee applied both to the DLA monies when received as income and to the DLA payments when converted into capital by being saved up.

 

19. Second, the present case was an obvious example of an informal trust over money, created without any legal formalities. Mr Atkinson refers to the arrangement as a secret trust, but I regard that as the wrong label. A secret trust is a special species of trust existing apart from a will (see GK v Secretary of State for Work and Pensions (JSA) [2012] UKUT 115 (AAC)). The present case was a straightforward informal family arrangement. In any event, Mr Atkinson is right to say this case is plainly distinguishable from the circumstances in the reported Commissioner’s case R(IS) 1/90, where the funds in question had remained the claimant’s at all times.

 

20. Third, paying off rent arrears helped to keep a roof over the daughters’ heads, and was a perfectly reasonable use of their savings, consistent with the purposes of that trust. As Mr Atkinson points out, an appointee may benefit from transport when a disabled family member’s higher rate DLA mobility component is converted into a Motability car – but that personal advantage does not mean the appointee has acted contrary to the terms of the secret trust.

 

21. I conclude, as indeed both parties agree, that the First-tier Tribunal’s decision involves an error of law. I therefore both allow the appeal and set aside the First-tier Tribunal’s decision.

 

22. Given all the circumstances, I also agree with both representatives that it is right for me to re-make this tribunal’s decision rather than send it back for a new hearing before a fresh tribunal. 

 

23. The decision that the First-tier Tribunal should have made, and which I now make, is therefore as follows. The first part of the decision is the same as the decision the Tribunal made, allowing the original appeal in part. The second part relates to the other aspect of the appeal, originally disallowed by the Tribunal:

 

“(1) The Appellant’s appeal against the Secretary of State’s overpayment decision of 17 October 2012 (based on the entitlement supersession decision of 10 October 2012) is allowed. The amount of £17,107.30 in income support for the period from 26 February 2002 to 30 August 2004 is not recoverable from the Appellant because the funds which it is alleged she failed to disclose were not her capital.

 

(2) The Appellant’s appeal against the Secretary of State’s revised overpayment decision of 8 May 2012 (revising the overpayment decision of 16 March 2011 which was in turn based on the entitlement supersession decision of 15 February 2011) is also allowed. The amount of £30,130.23 in income support for the period from 31 August 2004 to 16 August 2010 is not recoverable from the Appellant because the funds which it is alleged she failed to disclose were not her capital.”

 

Two remaining matters

24. There are two remaining matters raised indirectly by this appeal.

 

25. The first matter is the suggestion by Mr Atkinson that I recommend that the Secretary of State’s decision-maker should investigate any income support entitlement the Appellant may have had for her daughters while they were aged under 16, or any entitlement they had in own right to income support or ESA on reaching the age of 16. This is because any such entitlements may have been affected by the funds which it is now accepted were held by the Appellant on trust for them. Mr Malik suggests that this is unnecessary, as the Secretary of State can carry out such an investigation of his own accord at any time. I agree with Mr Malik. I do not think it is appropriate to make any such recommendation.

 

26. The second matter concerns the Appellant’s entitlement to housing benefit and council tax benefit. The DWP’s decisions to reassess the Appellant’s entitlement to income support led the council to take similar action as regards housing benefit and council tax benefit. The Tribunal did not have an appeal before it about those local authority-administered benefits. Likewise I do not have such an appeal before me, although some of the council’s correspondence is on file. However, as Mr Atkinson points out, the decisions made by the Upper Tribunal on the Appellant’s appeals should enable the local authority to revise their earlier decisions. Doubtless Mr Malik can advise the Appellant further in that regard.

 

Conclusion

27. It follows my conclusion is that the decision of the First-tier Tribunal involved an error of law. So I allow the appeal and set aside the decision of the tribunal (Tribunals, Courts and Enforcement Act 2007, section 12(2)(a)). I also re-make the tribunal’s decision (section 12(2)(b)(ii)) in the terms set out above. 

 

28. In something approaching plain English, the Tribunal should have decided that the funds accumulated in the Appellant’s savings accounts from the payments of DLA to the Appellant’s daughters were held at all times by her on trust for them. The money was as a matter of fact never her money. It was her daughters’ money (whoever’s name was on the savings accounts). It follows that the decisions disallowing income support for the relevant periods were wrong. The consequential income support overpayment decisions, which are the subject of the present appeal, are accordingly reversed. 

 

 

 

 

 

Signed on the original Nicholas Wikeley

on 3 November 2015 Judge of the Upper Tribunal