Decision No:  C5/04-05(IS)

SOCIAL SECURITY ADMINISTRATION (NORTHERN IRELAND) ACT 1992

SOCIAL SECURITY (NORTHERN IRELAND) ORDER 1998

INCOME SUPPORT

Appeal to a Social Security Commissioner
on a question of law from a Tribunal's decision
dated 7 March 2004 (arising out of a hearing held on 4 March 2004)

	DECISION OF THE SOCIAL SECURITY COMMISSIONER
	  
1.	This is an appeal by the Department, with the leave of a Commissioner, against the decision of the Tribunal, allowing an appeal from a decision of a decision maker, to the effect that the claimant is entitled to income support (IS) from 3 September 2003.

2.	I arranged a hearing of the appeal at which the claimant, who was present, was represented by Mr Brady, Welfare Rights Centre, Newry, while the Department was represented by Mr Crilly of Decision Making Services (DMS).

3.	The relevant factual background in relation to this case can be set out as follows.  The claimant owned her home jointly with her daughter.  On 26 May 2003 she left her home to live with another daughter. On 3 June 2003 the Department contacted the claimant by telephone regarding her previous home.  The claimant stated that she had moved out of her previous home due to domestic problems and was currently living with her other daughter on a temporary basis.  A questionnaire was issued to the claimant on 4 June 2003 concerning her original home.  She was also advised that payment of her IS was suspended until matters concerning the property were resolved.  A letter from the claimant’s solicitor was received in the Department on 20 June 2003 stating that she would not be making any attempts to obtain her share of the property and that her daughter was still residing in the house and was unwilling to sell it.  On 24 June 2003 the claimant was advised in writing by the Department that her payments of IS would be resumed for the time being pending a valuation of her share of the property.  The situation would then be reviewed upon receipt of the valuation.  A reply was received from the claimant on 3 July 2003 stating that the house was not for sale and that she no longer lived there.  On 8 September 2003 a decision maker decided that the claimant was not entitled to IS because she was treated as possessing capital in excess of £8,000.  The claimant appealed against this decision on 22 September 2003.  Information contained in the appeal form disclosed that the property in question had now been sold.  It was later established that the house had been sold on 3 September 2003 for £44,892.66 and that the claimant had given her share of the proceeds of the sale to her daughter.

4.	The decision of the Department was revised on 22 October 2003 to take account of the fact that the claimant no longer had capital.  However, the outcome was unchanged as the decision maker decided that the claimant was treated as possessing capital of which she had deprived herself in order to secure entitlement to IS.

5.	On 7 March 2004 the Tribunal allowed the appeal against the decision, deciding that the claimant should not be treated as possessing the capital because she did not deprive herself of it for the purposes of securing entitlement to IS.

6.	The Tribunal, which consisted of a legally qualified member sitting alone, gave the following reasons for its decision: -

“ 1).	At Section 5 of Decision Maker’s submission, at paragraph 8, I have been asked to consider the following issues:

(a)	Did [the claimant] possess a capital asset?
(b)	Did [the claimant] deprive herself of a resource in order to receive             Income Support?
(c)	What knowledge did [the claimant] possess of the capital rules?

		2).  	[a] Yes, appellant was a co-owner of 41 […] Park, a house she bought in 1996 jointly with her daughter [P…].  She obtained a joint mortgage with [P…] with the Woolwich in order to buy the house.

Appellant was a legal and beneficial owner of the house from date of purchase in 1996 to date of sale, 3.9.03.

3).  	I will now consider subsection (c) what knowledge did [the claimant] possess of the capital rules?

[The claimant] was told in June 2003, that if her share of the house was over £8,000, then she may not be entitled to income support.  In the meantime, pending valuation of the property, appellant was paid Income Support.  That basically, was the sum of appellant’s knowledge of the capital rules.

4).	I now turn to subsection (b), did [the claimant] deprive herself of the resource in order to receive Income Support.  I will deal with this question in two parts, the first part being – did [the claimant] deprive herself of the resource?  I have no hesitation in stating that [the claimant] did deprive herself of a capital asset, namely a half share in the house co-owned by her at 41 […] Park.

I find that [the claimant] must have told her solicitor that [P…] was to receive all the proceeds from the sale of the house, as [P…] had been the sole person paying the mortgage.  This is the interpretation I take from the letter from C and G…Solicitors dated 6.10.03 at paragraph 2.

“Our client (ie, [the claimant]) received no proceeds of the sale because it was her daughter who was actually paying the mortgage…”

It is however blatantly untrue to say that [P…] had been entirely responsible for the mortgage and I find that [the claimant] was very economical with the truth when she “forgot” to mention to her solicitor that she herself was in receipt of housing benefit, namely a half share of the mortgage from January 99 to September 2003, which was paid directly to the Woolwich.

The second part of (b), having confirmed that [the claimant] did deprive herself of a capital asset, is, did [the claimant] deprive herself of the resource “for the purpose of securing entitlement to income support or increasing the amount of that benefit …?  (Regulation 51 of Income Support (General) (NI) 1987.)

As a tenant of the house prior to 1996, appellant received income support.  As a homeowner from date of purchase of house in 1996 (as a co-owner) appellant received income support.  Then in January 1999, appellant received an unexpected bonus – she was told that she was entitled to housing benefit and half of the mortgage costs were paid to her lender, the Woolwich.

[The claimant] had not been working for many, many years yet was of the opinion that home owner or not, the state would provide for you by way of benefits.

I also accept that [the claimant] was very fond of her daughter [P…] and was most upset when [P…’s] brief marriage broke up in 1998 after only 3 months.  Several years later in 2002/2003, [P…] got a new boyfriend who came to live in the house.  Domestic arrangements broke down between [P…], the boyfriend and [the claimant], the latter moved out around May or June 2003 to stay briefly with [her daughter G…] and then with her mother, [Mrs S…J…].

It was around August 2003 when [the claimant] decided that the best way out of the “empasse” was to agree with [P…] that the house should be sold, and [P…] was to receive all the proceeds of sale to enable her to start a new life with her boyfriend in Magherafelt, and to help her financially to build a hew house.

I find it was very short-sighted of [the claimant] to have given away to her daughter, the equivalent of over £22,000, in that appellant appears to have no savings of any sort but this gift, this deprivation of capital, was given out of natural love and affection for her daughter, to enable [P…] to get a new start in life, after her disastrous brief marriage.

It appeared to me at the hearing, that the long-term plan was that [P…] was to have the house “in the future”, possibly even on [the claimant’s] death, but nothing had actually been formally decided until August 2003, when the house was put on the market, and [the claimant] gave instructions to her solicitor to pay the net proceeds to [P…].

5.     I therefore find that [the claimant] did deprive herself of a resource, but that this was not done for the purpose of securing entitlement to income support or increasing the amount of income support she could receive.  This means [the claimant] is not to be treated as possessing capital in the sum of £22,446.33 which was the value of a half share of the net proceeds of sale of the house.

I can appreciate that the decision maker may think appellant was very naive not to have considered keeping some of the capital from the sale of the house, but [the claimant] had by 3 September 2003, arranged to go and live with her mother and would have no housing costs, she thought that as she had lived on benefits (income support) for the last 13 years that the situation of continuing to be in receipt of income support should not be an issue.  I accept that appellant was warned in June 2003 that she may not be entitled to benefit depending on the value of the house, but this warning went completely over the appellant’s head.

6.	No notional capital from the sale of house is to be attributed to [the claimant].  It is up to the Department to make their own enquiries about any other bank accounts, or any savings of any sort which appellant may have had at 3 September 2003.

		Appeal is therefore allowed.”

7.	The Department applied to the legally qualified member of the Tribunal to appeal to a Commissioner but such leave was refused on 3 June 2004.  However, leave to appeal was granted by a Commissioner on 19 August 2004 on the grounds that: -

“The Tribunal’s decision might be wrong in law, because it is arguable that: -

(i)  the Tribunal failed to give proper consideration to the fact that the claimant was specifically warned about the effect of capital on benefit entitlement;
(ii)  the Tribunal did not take into account fully all the reasons behind the claimant giving the proceeds of the sale of her home to her daughter.”

8.	The legislation governing the rules of capital for IS purposes is contained at section 130 and section 132 of the Social Security Contributions and Benefits (Northern Ireland) Act 1992, as well as at regulations 45, 46 and 49 of the Income Support (General) Regulations (Northern Ireland) 1987.  Also regulation 51(1) of the Regulations provides that a claimant may be treated as possessing capital of which he has deprived himself for the purposes of securing entitlement to IS or increasing the amount of that benefit - there are exceptions set in regulation 51(1) but they are not applicable in this case.) 

9.	Mr Crilly’s main submission was were as follows - and I quote from his skeleton argument: -

“4.  The tribunal found that [the claimant] had been warned about the effects of capital on her entitlement to benefit ….  It was also aware that benefit had at one stage been suspended pending a valuation of the property in question.  I submit that the tribunal attached insignificant weight to the fact that [the claimant] had been specifically warned about the effect of capital on the payment of her benefit on two separate occasions.  Given the evidence before the tribunal I submit that its decision was an unreasonable one to make.

At the very least, I submit that the tribunal failed in its inquisitorial role by not fully looking into the reasons why [the claimant] did not understand the warnings.  Nor did it adequately explain why it was prepared to accept why the warnings given to the claimant “went completely over the appellant’s head”.

5. I further submit that, whilst the tribunal was entitled to find that [the claimant]  gave the proceeds from the sale of her home to her daughter out of natural love and affection, it failed to consider fully any other reasons that may lie behind the deprivation of the capital and, as a consequence, erred in law.”

10.	Mr Crilly also relied on the Great Britain Commissioner’s decision of Mr Commissioner Rice – R(SB)9/91 (affirming R(SB)38/85) which stresses that securing benefit need not be the predominant motive underlying the relevant transaction but it is sufficient that a significant operative purpose is to obtain benefit.

11.	Mr Brady submitted that the Tribunal was entitled to come to the conclusion to which it came.  The fact that the Department had put the payment of IS in question by suspending it, does not inevitably result in the motive for the subsequent sale of the home being to get benefit.  There was no evidence that the handing over of the claimant’s interest in the home was in the nature of an accelerated advancement of inheritance to the daughter but was a step taken in the particular circumstances that arose because of problems in the claimant’s daughter’s life.

12.	I accept that the proper approach in a case such as the present one is to take the approach set out by Mr Commissioner Rice in R(SB)9/91 (a supplementary benefit case), who stated, at paragraph 14: 

“In the present case, the predominant motive was doubtless to advance the claimant’s children.  But a significant operative purpose was also to obtain supplementary benefit in the same exercise.  In other words, the claimant’s intention was to kill two birds with one stone, to accelerate the daughter’s inheritance and at the same time to claim supplementary benefit.  There were two co-ordinate purposes.”

13.	In the present case there may well have been reasons, other than those found by the Tribunal, for the giving of the proceeds of the sale of the house by the claimant to her daughter.  It is possible that the predominant motive was not (as it was in R(SB) 9/91) to give an advancement of inheritance to the daughters.  However, I conclude that the Tribunal erred in law by failing to consider fully (i) why the claimant deprived herself of the relevant capital and, in particular, (ii) whether a significant operative purpose in the deprivation was to obtain benefit.  These were issues that the Tribunal ought to have dealt with, bearing in mind its inquisitorial role.

14.	Accordingly I allow the Department’s appeal and set aside the Tribunal’s decision.  In the circumstances I refer the case back to a freshly constituted tribunal for re-determination, as there are factual matters in issue for resolution by a tribunal.  This tribunal should bear in mind not only what I have stated in this decision but also what has been stated by Mr Commissioner Rice in Great Britain decision R(SB) 9/91, especially at paragraph 12 to 14, and by Mr Commissioner Hallett in Great Britain decision R(SB) 38/85, especially at paragraph 22.

J A H Martin QC
CHIEF COMMISSIONER

14 January 2005