DECISION OF THE SOCIAL SECURITY COMMISSIONER
1.	My decision is as follows. It is given under section 14(8)(b) of the Social Security Act 1998.
1.1.	The decision of the Stockport appeal tribunal under reference U/040/125/2002/01630, held on 30 April 2003, is erroneous in point of law.
1.2.	I set it aside and remit the case to a differently constituted appeal tribunal.
1.3.	I direct that appeal tribunal to conduct a complete rehearing of the issues that are raised by the appeal and, subject to the tribunal’s discretion under section 12(8)(a) of the Social Security Act 1998, any other issues that merit consideration in accordance with my directions in paragraphs 12 to 23.

The appeal to the Commissioner
2.	This is an appeal to a Commissioner against the decision of the appeal tribunal brought by the claimant with my leave. The Secretary of State supports the appeal.
The history of the case
3.	The issue in this case is whether the claimant has actual or notional capital in excess of the £16,000 threshold that bars entitlement to income support. The issue arises following the sale of the claimant’s home - she is now in residential care – and the disposal of part of the proceeds of sale. She is incapable of acting herself. All transactions relating to the sale of the property, the proceeds of sale and the claim for benefit have been handled by the claimant’s daughter as her appointee for social security purposes and her attorney under an enduring power of attorney. Part of the proceeds were applied by the appointee in repaying a loan that she and her husband had made to the claimant and her husband, and to the payment of interest thereon.
4.	Initially, the case was analysed as depending on the notional capital rule in regulation 51 of the Income Support (General) Regulations 1987. It was heard on 23 October 2002, but I set aside the decision in CIS/5459/2002 (pages 72 and 73 of the papers). 
5.	The case was reheard by a different tribunal on 30 April 2003. The appointee did not attend, but her husband did. The tribunal, for the first time and without warning, raised a new analysis. It was this. Under the terms of the loan agreement, no interest was payable in the circumstances that had occurred. The appointee had paid the proceeds of sale into her own bank account. She had no authority to spend the money as she did, as she was in breach of her fiduciary duty to her mother, the claimant. So, the appointee must be taken to have spend her own money, not the claimant’s. The claimant retained the money appropriated by the appointee and had actual capital in excess of the capital threshold for income support entitlement.
A fair hearing
6.	In my directions for the rehearing, I did not deal with the fiduciary duty of an agent. However, the tribunal was entitled to deal with the issue under my general direction to the tribunal ‘to conduct a complete rehearing of the issues that arise for decision.’ And the tribunal had discretion under section 12(8)(a) of the Social Security Act 1998 to consider issues that had not been raised by the parties. 
7.	However, the tribunal’s powers had to be exercised in the context of the requirements of natural justice and of the Convention right to a fair hearing under the Human Rights Act 1998. Those requirements are, in the circumstances of this case, identical. The relevant circumstances are these: 
•	the issue was one that had not been raised before; 
•	the parties had no notice of it; 
•	it was a technical, legal issue, not a purely factual one; 
•	the appointee, and therefore the claimant, were represented only by the appointee’s husband who has no legal knowledge or experience; and 
•	the issue clearly gave rise to a potential conflict of interest between the appointee and the claimant. 
In that combination of circumstances, the tribunal should have adjourned to allow the appointee to arrange representation, perhaps even separate representation for herself and her mother.
8.	So, the claimant was denied a fair hearing. The tribunal thereby went wrong in law and its decision must be set aside. 
The fiduciary duty issue
9.	However, if the tribunal nonetheless came to the correct and inevitable conclusion in law, I would not direct a rehearing. I would substitute my own decision to the same effect. So, I have to decide whether the tribunal went wrong in dealing with the substance of the matter.
10.	The tribunal did go wrong in substance as well as in procedure. The tribunal did not correctly direct itself in law. It did not refer the decision of Mr Commissioner Rice in R(IS) 17/98. Given the terms of the tribunal’s reasons, I can only assume that the tribunal was unaware of that decision. As Mr Rice pointed out, if an attorney appropriates funds in breach of the fiduciary duty to the claimant, the action is effective to transfer the capital to the attorney, but the claimant has a right to recover. That right is in law a chose in action. It forms part of the claimant’s actual capital and must be valued.  Point 5 of the headnote in that case suggests that the value is the same as the amount of money appropriated. It refers to paragraph 9 of the decision. It seems to me that that is a misreading of the Commissioner’s decision. He said only that the chose had to be valued. He did not say what that value was or how it should be ascertained. 
11.	In short, the tribunal made the mistake of confusing the breach of fiduciary duty with the remedy that is available to rectify that breach. For this reason also the tribunal’s decision must be set aside. A rehearing is appropriate. 
The rehearing 
12.	I confirm and repeat the directions that I gave in CIS/5459/2002 at page 72. 
13.	There are some additional issues on which I need to comment.
The loan agreement
14.	This is at page 34 of the papers.
15.	On the face of it, it appears to provide for interest at 11% and for repayment on demand with three months notice. The local authority has accepted the agreement at face value: see page 90 of the papers. However, the tribunal had a different reading, based in part in on a need to make sense of the written terms in view of the evidence from the appointee’s husband, who was a party to the agreement. 
16.	The tribunal will have to decide how the agreement is to be interpreted. So far as the interest is concerned, there are only two possibilities.
17.	One possibility is the interpretation of the tribunal. This is that no interest was payable in the circumstances that arose. On this interpretation, the appointee was not entitled to take the money. The claimant is entitled to recover it. That right is her property. I comment on its valuation below. 
18.	The other possibility is that interest is payable. On this interpretation, the interest is taxable. On the information before me, it has not been declared to the Inland Revenue. If the tribunal adopts this interpretation, it should invite the Secretary of State to send a copy of the papers to the Inland Revenue so that this matter can be investigated. I emphasise that this is not a general invitation to tribunals to refer all possible instances of tax liability to the Inland Revenue. This is not a case in which (as so often happens in child support cases) there are disputed issues about income, suspicions but limited hard evidence to support allegations, and reasoning by inference based in part on failure to co-operate and disclose. This is, in contrast, a case in which the appointee’s own case is that she and her husband have received interest on a loan. An alternative approach will be for the tribunal to accept the undertaking of the appointee’s solicitor that the matter has been, or will be, regularised with the Inland Revenue. The solicitor will be only too aware of the responsibilities of the legal profession, so recently considered by the Family Division of the High Court in P v P [2003] 4 All England Law Reports 843.
Valuation of a chose in action
19.	This may or may not be an issue that the tribunal has to consider. Whether it is or not will depend on how the tribunal interprets the loan agreement. If it finds that interest was payable, then the appointee was entitled to it. But if it finds that it was not payable, the money taken by the appointee was properly the claimant’s. The claimant will have a right to recover it. Normally, the value of the chose would reflect the risk and cost of recovery. In other words, it would be discounted. However, in view of the relationship between the persons involved and the appointee’s obvious concern for her mother’s welfare, it is possible that no such risk or cost would be involved. It may be that the tribunal would consider that it could properly be valued at, or very close to, the amount of the money taken by the appointee.
20.	The appointee’s solicitor will be entitled to address the tribunal on this issue, if it arises. It may be that solicitor will wish to produce evidence of valuation.
Representation
21.	As I pointed out to the appointee when I granted leave, there is, with the best will in the world, a potential conflict between her interests and those of the claimant. She remains the claimant’s appointee for social security purposes unless and until she is replaced, either at her request or on the Secretary of State’s initiative. Assuming that she remains appointee at the date of the rehearing, the tribunal will have to ensure that the interests of the claimant are properly considered. This will require a strenuous exercise of its inquisitorial duty. The tribunal may be helped in this by the fact that the appointee is now represented by a solicitor. That solicitor will, as a matter of professional integrity and duty to the tribunal, be aware of the possibility of conflict between his client’s personal and representative interests. I am sure that the solicitor will present the case as dispassionately as possible.
The power of attorney
22.	The claimant is no longer capable of managing her own affairs. The power of attorney should have been registered with the Court of Protection. I do not know if it has been. If it has not, the tribunal must take this into account as appropriate under the Enduring Powers of Attorney Act 1985 in considering the way the power has been administered by the Attorney. Any lack of registration can readily be remedied. 
Precision of decision-making
23.	The tribunal may be tempted to avoid the need for absolute precision in decision-making. If it becomes clear to the tribunal that the claimant’s capital significantly exceeds the capital threshold, it may not be appropriate to concern itself with the some of the smaller items of expenditure from the claimant’s capital. However, the closer the claimant’s capital is to that threshold, the more precise the tribunal must be in making findings on the actual capital. The reason is this. Although the tribunal is limited to considering the circumstances at the date of the decision under appeal (22 June 2002), the diminishing notional capital rule under regulation 51A will have to be applied if the claimant makes a claim in the future. The findings on this claim will not as a matter of law be binding in respect of the later claim: see section 17 of the Social Security Act 1998. But as a matter of practice, the findings will be used as the basis for the determination of that claim. Hence the need for precision if it is possible that a future claim might lead to some entitlement in the foreseeable future. 

Summary
24.	I allow the appeal and direct a rehearing. 

Signed on original	Edward Jacobs
Commissioner
20 November 2003