THE SOCIAL SECURITY COMMISSIONERS

	Commissioner's Case No:  CIS/834/1997

	SOCIAL SECURITY ADMINISTRATION ACT 1992
	SOCIAL SECURITY CONTRIBUTIONS AND BENEFITS ACT 1992

	APPEAL FROM A DECISION OF A SOCIAL SECURITY APPEAL TRIBUNAL
	ON A QUESTION OF LAW

	DECISION OF THE SOCIAL SECURITY COMMISSIONER

	COMMISSIONER: MR J MESHER

	[ORAL HEARING]

	DECISION OF THE SOCIAL SECURITY COMMISSIONER

1.	The claimant's appeal is allowed. The decision of the Birmingham social security appeal tribunal dated 17 April 1996 is erroneous in point of law, for the reason given below, and I set it aside. The case is referred to a differently constituted social security appeal tribunal for determination in accordance with the directions given in paragraph 20 below (Social Security Administration Act 1992, section 23(7)(b)).

2.	The appeal stems from the adjudication officer's decision, after the claimant and his family moved house on 10 May 1994 and increased the amount of the mortgage, to restrict the amount of housing costs to the amount allowed on the old house. The restriction was applied under paragraph 5A of Schedule 3 to the Income Support (General) Regulations 1987. Paragraph 5A came into force on 2 May 1994. Its general rule was that housing costs for mortgage interest incurred after 2 May 1994 were not to be met. Among the exceptions from that rule was that, where housing costs had been allowed on a former liability before the new liability was incurred, the amount of the former liability would continue to be met (sub-paragraphs (3) and (4)). In a number of other cases the full new liability would be met if specified conditions were satisfied. The immediately relevant provisions in the present case are sub-paragraphs (8) and (9):

"(8) The conditions specified in this sub-paragraph are that the loan was taken out, or an existing loan increased, either--
 (a)	to make adaptations to an existing property to meet the special needs of a disabled person; or
 (b)	to acquire alternative accommodation more suited to the special needs of a disabled person than the accommodation which was occupied before the acquisition by the claimant;
and in this sub-paragraph a disabled person is a person in respect of whom a disability premium [or certain other premiums is included in the applicable amount].

 (9) The conditions specified in this sub-paragraph are that--
 (a)	the loan commitment increased in consequence of the disposal of the dwelling occupied as the home and the acquisition of an alternative such dwelling; and
 (b)	the change of dwelling was made solely by reason of the need to provide separate sleeping accommodation for children of different sexes aged 10 or over who are part of the same family as the claimant."

3.	The facts as found by the appeal tribunal were as follows (correcting a typing error):

"1. [The claimant] lives with his wife and now eight children. At the time of his claim he had seven children.

 2. He has four boys born 29th October 1979, 11th October 1980, 26th November 1981, 28th November 1982. His four youngest children are all girls, the eldest born 16th January 1985, the other aged 6, 2 and 1 years approximately.

 3. [The claimant] was awarded the Higher Rate Mobility Component of DLA from the 30th June 1993 to the 29th June 1996 and the Lowest Rate Care Component from 9th November 1993 to 29th June 1996. The awards were made on the basis of arthritis, dizzy spells and low blood pressure.

 4. Before the 10th May 1994, [the claimant] lived in a three bedroomed property at 200 Warwick Road, Birmingham on which he had a mortgage of some £19,000. The size of the rooms at Warwick Road were as follows:
[details omitted: three bedrooms, two living rooms]

[The claimant] slept downstairs in one of the living rooms so that he was on the same floor as the bathroom. His eldest son had the smallest bedroom to himself as he preferred to sleep alone; the youngest and sometimes the second youngest children slept with his wife in another bedroom and all the remaining children were in the third bedroom.

 5. On the 10th May 1994, [the claimant] sold 200 Warwick Road for £38,000 and moved to 20 Fernley Road, Sparkhill, Birmingham, which he bought for £38,000 having taken out a mortgage of £34,000. The balance payable to [the claimant] after these transactions was £14,549.83.

 6. Fernley Road is a bigger property than Warwick Road, having the following accommodation:
[details omitted: three bedrooms, three living rooms, bathroom later built downstairs]

[The claimant] now sleeps in one living room downstairs, the four older boys sleep in one bedroom, the girls sleep in the other bedroom although the younger ones may sleep with his wife in the third bedroom."

4.	In correspondence before the adjudication officer's decision under appeal was made the claimant had described the reason for the move as being to gain space. The new house had a loft that he hoped to convert. Some of the proceeds of the sale of the old house were to be used to renovate the new house and to build an extension for a kitchen/bathroom (about £7,500). The claimant had repaid a loan of £5,000 and used £2,000 on a visit to Mecca. At the hearing before the appeal tribunal it was submitted in addition that the new house was more suited to the claimant's needs as a disabled person.

5.	The appeal tribunal confirmed the adjudication officer's decision. It recorded that there was no dispute that the claimant had moved and increased his loan after 2 May 1994.

6.	On paragraph 5A(8), it found that the claimant counted as a disabled person and continued:

"We decided that [the claimant] did not satisfy the requirements of this legislation because the facilities to provide for his disablement were the same at Warwick Road as at Fernley Road, namely a bathroom and toilet on the same floor as his sleeping accommodation. In fact when he first moved to Fernley Road, the bathroom was not downstairs and he had to make that adaption after he moved."

7.	On paragraph 5A(9) the appeal tribunal said:

"[The claimant] has four boys and four girls and the same number of bedrooms in each house with, in each house, one living room being used as a bedroom for [the claimant]. The living and sleeping arrangements can therefore be said to be identical.

We consider that [the claimant] reasonably moved to larger accommodation because of his expanding family but the Regulations appear to make no provision for this. This is curious because it appears that if someone had a very large family of children all of the same sex then no provision is made for an increased loan whereas a smaller mixed sex family might well mean that a claimant may qualify. The argument put forward by the representative in respect of both disability and the separate sleeping accommodation requirement related mainly to the need for a larger property. But it was argued quite reasonably that when [the claimant] was sleeping downstairs at the smaller property, there was little living accommodation for the remainder of the family. The bigger bedrooms in the new house clearly provide better accommodation for the children. Nevertheless the arguments relating to both disability and to the children are concerned with the need for larger accommodation. The needs of [the claimant] for his disablement alone are met equally by both properties. Sub-paragraph (9) states that the change of dwelling must be made "solely" by reason of a need to provide separate sleeping accommodation for children of different sexes. In this case it was not the sole reason, the reason was mainly to provide more adequate, ie roomy accommodation."

8.	The claimant now appeals against the appeal tribunal's decision, with the leave of its chairman. The appeal was not supported by the adjudication officer in written submissions. I directed on oral hearing, as there seemed to me to be a number of legal difficulties involved. At the hearing, the claimant was represented by Mr Allan Norman of J M Wilson, solicitors. The adjudication officer was represented by Mr Leo Scoon of the Office of the Solicitor to the Department of Social Security. I am grateful to both representatives for their helpful submissions.

9.	Mr Norman's first point repeated one put forward rather tentatively in an earlier written submission. However, now it was supported by a Commissioner's decision of which I was previously unaware. The point arises because the documents before the appeal tribunal included a copy of the offer to the claimant of a mortgage advance of £34,000 dated 25 February 1994. The offer contained the sentence "Your acceptance of this offer, and the resulting agreement, only takes effect when you have executed the Mortgage Deed and it has been dated by the Solicitor on your behalf". There seems to be no doubt that the mortgage deed was dated 10 May 1994, the date of completion of the purchase, and Mr Norman has submitted that it was executed on 4 May 1994. He went on to submit that it was extremely likely that contracts had been exchanged for the purchase of the new home before 3 May 1994 (although he did not have any documents showing the precise date). The claimant would on exchange of contracts have become the beneficial owner of the property and have been under a liability to pay the purchase price on completion. Mr Norman submitted that in those circumstances, accepting that the test was when liability to make payments of interest on the mortgage loan arose, the housing costs were incurred before 3 May 1994. In support he cited the decision of Mr Commissioner Howell in CIS/2978/1995.

10.	In that case, the claimant became liable under a County Court order made by consent on 31 March 1994 to pay her ex-husband £13,000 on his transferring to her his interest in the former matrimonial home subject to her taking over responsibility for the existing mortgage. Before committing herself to the terms of the order the claimant had obtained the firm offer of a further advance of £13,000 from the existing lender. Because of various delays, the transfer of the ex-husband's interest and the drawing down of the further advance did not take place until 10 June 1994. The Commissioner held that an appeal tribunal had not erred in law in deciding that the housing costs in relation to the £13,000 had been incurred before 3 May 1994. He held that paragraph 5A(1) did not apply a cut-off to all instalments of mortgage interest due after 2 May 1994, but that the test was the point at which the claimant's liability to make the increased payments of interest arose. In paragraphs 19 to 21, he said:

"On the one hand it seems obvious that the claimant did not become bound to start paying the building society any additional interest until the money was actually advanced to her to enable her to complete the purchase of her husband's interest in June 1994. ... On the other hand there can be no doubt whatever that on the making of the county court order on 31 March 1994 she became irrevocably bound to go through with the purchase of her husband's interest, of which she thereupon became the absolute owner in equity; and thus to make the payment of the £13,000 forthwith upon the delivery of a proper instrument of transfer to her. This could have occurred at any point from then on, whenever the husband or his solicitors produced it. From the date of the court order therefore, the claimant had an existing obligation to pay her husband the whole sum of £13,000 forthwith whenever called on to do so by the production of a transfer. The only practical way in which she could do this was by taking up the agreed further advance on the mortgage loan pursuant to the offer made by the building society which she had already accepted. ... Balancing these alternative ways of looking at the situation against one another, it seems to me that the tribunal did have material before them from which they could properly and reasonably conclude ... that on 31 March 1994 she had entered into a commitment to go through with the loan and therefore to pay additional costs by way of interest ... . On this basis her new liability had arisen, and her costs relating to it had been `incurred' in the relevant sense for para 5A(1), before the cut-off date of 2 May 1994 even though the payments in respect of her housing costs did not start until after that date."

11.	Mr Norman submitted that in substance the claimant's position in the present case was the same. The only practical way in which in which he could from the date of exchange of contracts meet his existing obligation to pay the purchase price for the new home was by taking up the offer of the mortgage advance. He was therefore committed to going through with the loan and the costs were incurred from the date of exchange of contracts.

12.	Mr Scoon submitted that a housing cost for the interest on a loan could not be incurred before the advance was made and the interest began to accrue. In the context of the sale and purchase of houses, the commitment to the payment of interest on the loan did not arise until the point of disposal of the old home and acquisition of the new home on completion of the transactions, including the mortgage. That was shown by the condition put on the mortgage offer by the building society. Mr Scoon had not been aware of Commissioner's decision CIS/2978/1995 before the oral hearing, but was content not to take an opportunity to make a further written submission after taking time to consider it.

13.	The position is that I should follow the legal principle applied in CIS/2978/1995 unless satisfied that that decision was wrong (Tribunal of Commissioners' decision R(I) 12/75). Mr Scoon's submission is one which is very strong indeed in the abstract, but it does not satisfy me that CIS/2978/1995 is wrong when the question is considered in the context of paragraph 5A. Paragraph 5A(1) cannot be given an absolutely literal meaning, as Mr Commissioner Howell showed. First, the new provision cannot be interpreted as biting on any instalment of loan interest falling due after 2 May 1994, including interest on loans taken out well before 3 May 1994, even though that might literally be said to be a housing cost incurred after 2 May 1994. Second, the new provision cannot be interpreted as biting on a loan on which the first actual payment of interest is due after 2 May 1994 if the liability to pay interest was incurred before 3 May 1994. It is accepted that if a loan was taken out on 30 April 1994 and interest started to accrue from that date, but the first repayment was not due until 31 May 1994, it would be unfair to subject that interest to the new regime of paragraph 5A. If those two steps away from an absolutely literal interpretation have to be taken, to give a practical and fair interpretation, it is only a small further step to say that where the claimant is before 3 May 1994 under a legal obligation to make a payment for the transfer of what will be the home and the only practical way of doing so is to take up the offer of a loan in reliance on which the obligation was undertaken, the liability to pay interest on the loan was incurred before 3 May 1994. That secures a practical and fair result. Although in CIS/2978/1995 the legal obligation arose from a court order and in the present case the obligation arose from a contract, I do not think that that is a difference of substance.

14.	Accordingly, I am satisfied that the appeal tribunal of 17 April 1996, although it was not referred to CIS/2978/1995, erred in law in not considering whether the claimant's housing costs on the new mortgage were incurred before 3 May 1994 and in not investigating the date when contracts were exchanged. That is so even though it was apparently agreed that the claimant had "moved and increased his loan" after 2 May 1994 and it seemed to be assumed by all parties that paragraph 5A applied. Even if a specific concession had been made by the claimant's representative about the interpretation of paragraph 5A, ie on a question of law, that cannot in an inquisitorial jurisdiction prevent the appeal tribunal's decision being found on appeal to be in error of law on that question.

15.	For that reason, the appeal tribunal's decision must be set aside as erroneous in point of law. It seems very unlikely indeed that contracts were not exchanged until after 2 May 1994, but it is possible. Therefore, I agree that the case must be referred to a differently constituted social security appeal tribunal for the necessary findings of fact to be made to apply the legal principle set out above. However, in those circumstances I can deal very briefly with the other points made by Mr Norman, which would be relevant if the claimant does not succeed on the above basis.

16.	I would not have found any other error of law in the appeal tribunal's application of paragraph 5A. Mr Norman made three further points. First, that the appeal tribunal misinterpreted the meaning of the phrase "solely by reason of" in paragraph 5A(9)(b), which is that the need to provide separate sleeping accommodation for children of different sexes aged 10 or over was the only factor which gave rise to a need to move, rather than a desire to move to a particular new home. Second, if "solely by reason of" was not to be interpreted in that way, paragraph 5A(9) was ultra vires for irrationality. Third, if, contrary to his submission, it was said that in view of the use made of the proceeds of sale of the old home the claimant's loan commitment had not increased in consequence of the disposal and acquisition of the homes, paragraph 5A(5) on loans for repairs and improvements should be considered.

17.	The first issue, the meaning of "solely by reason of" in paragraph 5A(9)(b), is a very difficult one. I think it is fair to say that Mr Scoon struggled to find a sensible meaning to put forward. The problem is that in practice in every case there will be some additional reason for choosing the particular new home as well as the need to provide separate accommodation for children of different sexes. If liking the garden of the new home or the colour of the front door takes the case outside paragraph 5A(9), then the provision can never have any practical application. Such an interpretation is therefore to be avoided. I think that it can be avoided by looking primarily at the reasons why it was decided to move from the old home. However, I shall not go into all the difficulties, because in my view the appeal tribunal did not err in law in concluding that the claimant did not come within paragraph 5A(9)(b). The basis for its conclusion was that the main reason for moving from the old home was to acquire more roomy accommodation generally. That was a finding which it was entitled to make on the evidence and was one which meant that the change of home was not solely by reason of the need to provide separate accommodation for children of different sexes, within the proper interpretation of paragraph 5A(9)(b). That result also seems to me to be in line with the statement of the Secretary of State on the Social Security Advisory Committee's recommendations on the draft amending regulations (see Cm 2537). In paragraph 6(1)(b)(xi) the Secretary of State rejected a recommendation to exclude cases where a move was to alleviate statutory overcrowding caused by an increase in the number of children, but in paragraph 6(1)(b)(xii) accepted the recommendation about excluding cases where the move was to provide separate sleeping accommodation for children of opposite sexes.

18.	On the second issue, I accept that the decision of the Court of Appeal in O'Connor v Chief Adjudication Officer (3 March 1999) is authority that the previously understood approach to the question of whether regulations are invalid on the ground of irrationality was too limited. But I am unable to accept that the result of interpreting paragraph 5A(9) as I have done above is irrational, in the sense that no reasonable Secretary of State could have made a regulation with that effect. The result might produce hardship in individual cases or cause differences in treatment between claimants who seem equally meritorious, but that does not make it irrational.

19.	On the third issue, I agree that, if it were said that the claimant did not need to increase his borrowing to make the change in homes, because all the proceeds of sale of the old home could have been put towards the purchase of the new home, then paragraph 5A(5) would need to be considered. On that basis some of the new mortgage would have been needed to finance repairs and improvements. However, it is a question of fact for an appeal tribunal to resolve whether one of the reasons for an increase in borrowing was the change in homes. The appeal tribunal of 17 April 1996 was, on the evidence, entitled to proceed on the assumption that the increase in borrowing was in consequence of the change. If the issue arises for the new appeal tribunal, it must be resolved on whatever evidence is then before it.

Directions to the new appeal tribunal
20.	There must be a complete rehearing of the claimant's appeal against the adjudication officer's decision issued on 1 August 1994. The new appeal tribunal must apply the legal approach set out in paragraph 13 above to the question of whether the provisions of paragraph 5A of Schedule 3 to the Income Support (General) Regulations 1987, as introduced with effect from 2 May 1994, apply to the circumstances of the present case. Mr Norman will no doubt ensure that whatever evidence is available is put to the new appeal tribunal about the date on which contracts were exchanged on the purchase of the claimant's new home in Fernley Road and of any other arrangements or agreements between the claimant and his building society. If paragraph 5A does not apply, the question of the appropriate housing costs must be decided according to the other provisions of Schedule 3. The adjudication officer's written submission to the new appeal tribunal should include a submission about what the appropriate housing costs would be on that basis. If paragraph 5A does apply, the new appeal tribunal must then have regard to the points made in paragraphs 17 to 19 above. In that event, I also direct that the new appeal tribunal is to apply the principle that a need to provide separate sleeping accommodation for children of different sexes aged 10 or over may exist before all the children involved have actually reached the age of 10 (following Commissioner's decision CIS/14657/1996 in a different context). Action may need to be taken to secure that result when the relevant children have reached the age of 10.

	(Signed)    J Mesher    
	Commissioner

	Date:  22 September 1999