LS-v-Department for Social Development (IS) [2015] NI Com 66
Decision No:  C4/15-16(IS)

SOCIAL SECURITY ADMINISTRATION (NORTHERN IRELAND) ACT 1992

SOCIAL SECURITY (NORTHERN IRELAND) ORDER 1998

INCOME SUPPORT

Application by the claimant for leave to appeal
and appeal to a Social Security Commissioner
on a question of law from a Tribunal’s decision
dated 14 February 2014

DECISION OF THE SOCIAL SECURITY COMMISSIONER

1.	This is an application for leave to appeal from the decision of an appeal tribunal sitting at Belfast.

REASONS

2.	I grant leave to appeal.  For the reasons I give below, I allow the appeal under Article 15(8)(a) of the Social Security (NI) Order 1998 and make the decision the tribunal should have made without making fresh findings of fact.  I find that the applicant possessed capital of £74,541.31 and should be treated as possessing notional capital of £12,000 on 8 August 2008.

	Background

3.	The applicant had claimed income support (IS) from the Department for Social Development (“the Department”) from 7 August 2008.  She had previously been awarded IS from 1 April 1995 to 9 August 2007.  That award ended because she had sold her home on 10 August 2007, receiving a capital sum of some £131,637.06, which was substantially in excess of the prescribed capital limit for IS.  In the new claim, the applicant declared possession of capital below the prescribed limit.  She was asked by the Department to provide evidence of her capital by way of bank statements and to provide evidence of how she had spent the proceeds of the sale of her house.  She did not provide all of the information requested by the Department and her claim was disallowed on 26 January 2009.

4.	The appellant provided further evidence by way of a letter from her community psychiatric nurse and a receipt for expenditure.  A revised decision was issued on 5 June 2009 to the effect that she was not entitled to IS.  This was because the Department decided that she possessed £79,541.31 actual capital and notional capital of £14,640 from 7 August 2008, and actual capital of £77,778.23 and notional capital of £14,640 from 26 January 2009.  She appealed.

5.	The appeal was unsuccessful.  However, the appellant appealed the tribunal decision to a Social Security Commissioner who, in decision C11/10-11(IS), set aside the decision of the tribunal and remitted the appeal to a newly constituted tribunal for determination.  This led to the appeal tribunal hearing on 22 March 2011, which resulted in a further disallowance of the appeal.  The applicant then appealed that further decision to a Social Security Commissioner who, in decision C7/11-12(IS), set aside the decision of the appeal tribunal and remitted the appeal to a newly constituted tribunal.  The appeal was heard by a tribunal consisting of a legally qualified member (LQM) on 14 February 2014.  The tribunal disallowed the appeal.  The applicant then requested a statement of reasons for the tribunal’s decision.  This was issued on 17 July 2014.  She applied to the LQM for leave to appeal to the Social Security Commissioner but leave to appeal was refused by a determination issued on 1 October 2014.  On 28 October 2014 the applicant applied to a Social Security Commissioner for leave to appeal.

	Grounds

6.	The applicant submits that the tribunal has erred in law by:

(a)	finding that the applicant continued to possess actual capital at the relevant date on the basis of the evidence before it;

(b)	including an element of notional capital in the amount of actual capital assessed by it.

7.	The Department was invited to make observations on the applicant’s grounds.  Ms Toner of Decision Making Services (DMS) replied on behalf of the Department.  She submitted that the tribunal had not erred in law as alleged in the first ground, but accepted that there was merit in the applicant’s second ground.

	Relevant legislation

8.	Primary legislation establishes the capital rule precluding entitlement to IS where capital exceeds a prescribed amount.  Section 130(1) of the Social Security Contributions and Benefits (NI) Act 1992 (“the 1992 Act”) reads:

“Exclusions from benefit

130.—(1) No person shall be entitled to an income-related benefit if his capital or a prescribed part of it exceeds the prescribed amount.”

9.	The prescribed limit for the purposes of the present appeal appears at regulation 45 of the Income Support (General) Regulations (NI) 1987 (“the IS Regulations”), which states:

“Capital limit

45. For the purposes of section 130(1) of the Contributions and Benefits Act as it applies to income support (no entitlement to benefit if capital exceeds prescribed amount), the prescribed amount is £16,000.”

10.	The IS Regulations make further provision for calculation of capital and for treating a claimant as possessing capital of which he has deprived himself for the purpose of securing entitlement to IS or increasing the amount of his IS.  Relevant provisions include:

“Calculation of capital

46.—(1) For the purposes of Part III of the Order as it applies to income support, the capital of a claimant to be taken into account shall, subject to paragraph (2), be the whole of his capital calculated in accordance with this Part and any income treated as capital under regulation 48 (income treated as capital).

(2) There shall be disregarded from the calculation of a claimant’s capital under paragraph (1) any capital, where applicable, specified in Schedule 10 (capital to be disregarded).

Notional capital

51.—(1) A claimant shall be treated as possessing capital of which he has deprived himself for the purpose of securing entitlement to income support or increasing the amount of that benefit except—

(a) where that capital is derived from a payment made in consequence of any personal injury and is placed on trust for the benefit of the claimant; or

(b) to the extent that the capital which he is treated as possessing is reduced in accordance with regulation 51A (diminishing notional capital rule); or

(c) any sum to which paragraph 43(2)(a) of Schedule 10 (capital to be disregarded) applies which is administered in a way referred to in paragraph 43(1)(a).”

11.	One further provision which is not directly relevant to the issues before the tribunal but which I will refer to below is the following:

“Diminishing notional capital rule

51A.—(1) Where a claimant is treated as possessing capital under regulation 51(1) (notional capital), the amount which he is treated as possessing— 

(a)	in the case of a week that is subsequent to— 

(b)	
(i)	the relevant week in respect of which the conditions set out in paragraph (2) are satisfied, or 

(ii)	a week which follows that relevant week and which satisfies those conditions,

shall be reduced by the amount determined under paragraph (2);

(c)	in the case of a week in respect of which paragraph (1)(a) does not apply but where— 

(i)	that week is a week subsequent to the relevant week, and

(ii)	that relevant week is a week in which the condition in paragraph (3) is satisfied, 

shall be reduced by the amount determined under paragraph (3).

(2) This paragraph applies to a benefit week or part-week where the claimant satisfies the conditions that— 

(a)	he is in receipt of income support; and

(b)	but for regulation 51(1), he would have received an additional amount of income support in that benefit week or, as the case may be, that part-week,

and in such a case, the amount of the reduction for the purposes of paragraph (1)(a) shall be equal to that additional amount”.

	Hearing

12.	I held an oral hearing of the application.  Ms Loughrey of Law Centre (NI) appeared for the applicant, who was not present.  Mr Gough of DMS appeared for the Department.

13.	Ms Loughrey on behalf of the applicant submitted that the tribunal had erred in terms of the reasons it had stated for its decision and in terms of the fact that it had double counted one element of expenditure by the applicant as both actual and notional capital.

14.	Some of the discussion at the hearing centred on a statement by the tribunal in its statement of reasons under the heading “The Tribunal’s approach”.  It stated:

“Actual capital is an asset which the appellant had at one point.  The onus lies on the appellant to show that it ceased to be actual capital.  In the absence of discharging this onus, and failing to account for the way in which capital was disposed of, the asset remains actual capital”.

15.	Ms Loughrey made the submission that this is not an entirely accurate statement of the law.  The point which I sought to make in the earlier iteration of this case in the decision on file C7/11-12(IS) was that a tribunal in such circumstances is entitled to consider that an asset remains actual capital, but is not obliged to consider that it remains actual capital.

16.	Mr Gough for the Department also accepted that this was not an entirely accurate statement of the law.  However, he supported the tribunal’s decision on the basis that it had made a careful decision, assessing all the evidence regarding each item of the applicant’s claimed capital expenditure, and addressing the credibility of her account in the light of the medical evidence concerning the appellant’s mental health condition and vulnerability.

17.	Mr Gough accepted the submission of Ms Loughrey that the tribunal had made an error in double-counting an element of the capital in both the actual and notional capital categories.  He accepted that this was a material error of law.  He also helpfully pointed to an error in the tribunal’s decision when it stated, in relation to notional capital, that “the diminishing capital rule applies from the date of transfer”.

	Assessment

18.	At first sight I was troubled by the statement of the tribunal which I have set out above.  I had made the point at paragraph 41 of the decision on file C7/11-12(IS) that a tribunal was not obliged to consider that a claimant still possessed unaccounted for capital in the absence of adequate explanation as to its disposal, but that it was entitled to.  The language of the tribunal had suggested that it had repeated the error of an earlier tribunal by holding that a claimant must be treated as possessing capital in the absence of failure to account for the way in which it was disposed of.

19.	It does seem to me, however, that the tribunal has not automatically treated the applicant as possessing capital in the absence of a failure to account for its disposal.  Rather, as submitted by Mr Gough, it has undertaken a careful and comprehensive review of the applicant’s evidence concerning her disposal of the capital which she possessed on 10 August 2007.

20.	The applicant had an opportunity to provide more documentary evidence in support of her case than at the previous tribunal.  However, she did not produce any new material of significance.

21.	The tribunal saw the applicant in person and assessed her account that she was vulnerable in the light of medical evidence.  However, the tribunal assessed her as “cool, defensive and at times arrogant, rather than vulnerable”.

22.	The tribunal addressed the plausibility of the applicant’s account in relation to each of the transactions in which she had withdrawn capital and claimed to have spent it.  It found that some of the explanations were too non-specific to explain withdrawal of specific sums.  It found an inconsistency in the date of the one invoice which had been produced for a funeral account which damaged its credibility.  It found the lack of supportive documentary evidence for matters such as house repairs and plastic surgery to cause the explanations to lack credibility.  It further noted and took into account inconsistencies in the applicant’s evidence.

23.	It appears to me clear that the tribunal has not accepted the applicant’s evidence as to what she did with the proceeds of the sale of her home in August 2007.  It has based its conclusion on evidence and has not made a presumption that the applicant still possessed capital, but rather, having sought to make findings on how the capital had been disposed of, has held that she still possessed the capital in issue at the date of claim on the balance of probabilities.  This is not an unreasonable or irrational conclusion and the tribunal was entitled to arrive at it.

24.	It does appear that the tribunal has erred in law in its calculation of actual capital.  It has included a sum of £12,000 given to the applicant’s granddaughter, and which it had considered to be notional capital, among the actual capital.  The applicant and the Department are in agreement on this point.  I grant leave to appeal on this ground.  The parties are of the common view that this is a material error of law, rather than an accidental slip in the decision which could be corrected under regulation 56 of the Social Security and Child Support (Decisions and Appeals) Regulations (NI) 1999 (SR 1999, No.162).  I agree.

25.	I have decided that the tribunal has erred in law on this basis and I set aside the decision of the appeal tribunal.

	Disposal

26.	I consider that this is a case in which I can give the decision which the tribunal should have given without making fresh findings of fact.

27.	I adopt the tribunal’s findings of fact.  I conclude that the applicant possessed actual capital of £74,541.31 and notional capital of £12,000 at the date of claim on 7 August 2008 and is not entitled to IS from and including that date on the basis that she possessed capital in excess of the prescribed limit.

	Postscript

28.	I will make some further observations on the tribunal’s statement to the effect that “the diminishing capital rule applies from the date of transfer”.  This is not in fact an accurate statement of law.  By regulation 51A(2) of the IS Regulations, the diminishing notional capital rule will start to apply from the date on which a claimant becomes entitled to receive IS and would have received a higher amount of IS but for the notional capital.  It is not the case that the diminishing notional capital rule applies from the date of transfer of the notional capital.  Therefore, it is only after the applicant’s actual capital has diminished to a figure below the prescribed limit – and therefore that she would be entitled to IS but for the fact that she is treated as possessing notional capital - that the notional capital can start to diminish.

29.	The impact of my decision is that the applicant had actual capital in excess of £70,000 in August 2008.  However, this has left her with disability living allowance as her main income.  Ms Loughrey submits that her child benefit and child tax credit awards have stopped, although she was unsure of the basis for that situation.  I am advised that the applicant has recently made a fresh claim for income-based employment and support allowance.  However, this claim has been disallowed on the basis of the prescribed capital rule.

30.	It seems to me that a decision-maker deciding a new claim, who has to assess the question of whether a claimant in a case such as this continues to possess actual capital, has to apply a certain measure of practical common sense.  The principle of finality in social security law means that the issue of how much capital the applicant possessed in August 2008 cannot be revisited.  However, there is no rule of law which requires that the amount of capital found to be possessed by the applicant in August 2008 must equally be in her possession at a later date of claim.  It might reasonably be expected that the applicant would have diminished any such sum by normal household expenditure in the intervening period.

31.	However, the IS Regulations make no formal provision for such a situation.  A decision-maker will have to exercise judgment as to what would have been reasonable expenditure for a household of a particular composition and with particular outgoings in attempting to assess what might remain from a capital sum found to have been possessed by a claimant at an earlier date.  Evidence of expenditure and of regular outgoings might be sought from the claimant to this end.  In the absence of evidence, a reasonable estimate may have to be made.

(signed)  O Stockman

Commissioner

30 November 2015