[2007] UKSSCSC CH 3700 2006 (30 November 2007)

DECISION OF THE SOCIAL SECURITY COMMISSIONER
1.	My decision is given under paragraph 8(4) and (5)(a) of Schedule 7 to the Child Support, Pensions and Social Security Act 2000:
I SET ASIDE the decision of the Wigan appeal tribunal, held on 24 July 2006 under reference U/06/079/2006/00472, because it is erroneous in point of law.
I give the decision that the appeal tribunal should have given, without making fresh or further findings of fact.
My DECISION is that the claimant’s entitlement to benefit is to be determined on the basis that his caravan is not to be taken into account as capital, because it is disregarded as a personal possession. 

REASONS
The issues and how they arise
2.	This case raises two issues. Is a caravan based at a non-residential site capital for the purposes of the housing benefit and council tax benefit legislation? If it is, is it a personal possession and as such to be disregarded?
The facts and the history of the case
3.	The facts of the case have not been in issue, only their interpretation. 
4.	The claimant claimed housing benefit in 2003. This claim was refused on the ground that he had capital in excess of £16,000. At the time, he and his wife had over £1,000 in a current account, £30,000 each in an ISA, and 135 shares in Marks and Spencer. The £60,000 in ISAs represented the balance of the proceeds of sale of their home after redeeming the mortgage and paying legal and other fees.
5.	The claimant claimed housing benefit again on 18 July 2005. The couple now had about £2,000 in the bank and 106 shares. On inquiry, the claimant explained that they had given £11,000 each to their son and daughter and used £30,000 to buy a caravan. They had owned several caravans in their lives, at first mobile ones and then a static one. As their current static caravan was not ideal for them in view of the claimant’s disabilities, they replaced it in May 2005, using the money from the ISAs. It was kept on a site in Wales. The site was a small one for 12 caravans. It was non-residential, being closed from the beginning of November to the end of February. Only the owners and their family and friends were allowed to use the site; subletting was prohibited. The caravan was moveable, having a hitch and wheels. The claimant used bottled gas for heating and cooking. Electricity and water were connected, although they can be easily disconnected. 
6.	The local authority refused the claim. The decision-maker decided that the value of the caravan was capital as ‘the caravan you have purchased is classed as a second home’. When the claimant exercised his right of appeal, the ground for refusing benefit was changed. The new ground was explained in a letter of 21 October 2005:
‘I consider that the value of your static caravan should still be excluded as capital. For it not to be included as capital it would have to be classed as a personal possession. As the caravan is connected to services and due to its size is not easily moved I consider it to be property and as such a capital asset.’
7.	The tribunal dismissed the appeal. That is clear, although there are difficulties in interpreting the chairman’s reasons. I deal with those difficulties below. 
The parties and their positions
8.	I have issued a number of directions in order to try to clarify my thinking. I am grateful to the parties for their responses and forbearance. 
9.	The claimant has consistently argued that the value of the caravan should be disregarded as a personal possession. Although the claimant has succeeded, I have not been able to accept his representative’s reasoning, because it was based on a confusion of concepts. 
10.	The local authority has argued that in the absence of any definition or guidance, each case must depend on its unique facts and the tribunal had come to the correct decision. I have considerable sympathy for this approach. My first instinct on receiving this case was that a personal possession was a limited class of possession with some close intimate or personal connection to the claimant. I have now persuaded myself that my first impression was wrong.
11.	In view of the nature of the issue, I invited the Secretary of State to join the proceedings as a party. The representative supported the appeal and invited me to remit the case for rehearing in accordance with the decision of the deputy Commissioner in CPC/0370/2006. I drew attention to some difficulties with the reasoning in that case. The representative accepted those difficulties, but continued to support the decision.
The legislation
12.	Housing benefit and council tax benefit are governed by the Social Security Contributions and Benefits Act 1992. They are both income-related benefits: section 123(1)(d) and (e). For convenience, I will refer only to the housing benefit legislation. The council tax benefit legislation is in equivalent terms.
13.	Section 134 of the Act provides for claimants to be excluded from benefit on account of the amount of their capital:
‘(1)	No person shall be entitled to an income-related benefit if his capital or a prescribed part of it exceeds the prescribed amount.’
Regulation 37 of the Housing Benefit (General) Regulations 1987 was made under that authority and set the threshold at £16,000. 
14.	Section 136 of the Act also provides for Regulations to be made:
‘(5)	Circumstances may be prescribed in which- 
	(a)	a person is treated as possessing capital or income which he does not possess;
	(b)	capital or income which a person does possess is disregarded’.
15.	Regulation 38 is made under that authority:
‘(1)	For the purposes of Part II of the Act as it applies to housing benefit, the capital of a claimant to be taken into account shall, subject to paragraph (2), be the whole of his capital …’
(2)	There shall be disregarded from the calculation of the claimant’s capital under paragraph (1), any capital, where applicable, specified in Schedule 5.’
16.	The relevant disregard in Schedule 5 refers to personal possessions:
‘11.	Any personal possessions except those which have been acquired by the claimant with the intention of reducing his capital in order to secure entitlement to housing benefit or to increase the amount of that benefit.’
17.	The 1987 and other housing benefit Regulations have been consolidated in the Housing Benefit Regulations 2006. The equivalent consolidated provisions are:
Regulation 37				is now		regulation 43
Regulation 38				is now		regulation 44
Schedule 5, paragraph 11	is now		Schedule 6, paragraph 12.
18.	As well as housing benefit and council tax benefit, the disregard applies in income support, jobseeker's allowance and (without the qualification) state pension credit. It applied to family credit, until that benefit was abolished. 
What the tribunal decided and why it was wrong in law
19.	There are three key paragraphs in the tribunal’s reasoning. The first reads:
‘Tribunal went on to consider whether it could be said that the caravan was a personal possession and whether it should have been excluded or taken into account.’
That is a correct statement of the issues.
20.	The tribunal went on the say:
‘Tribunal was satisfied, as was confirmed by the Presenting Officer, that there was no suggestion that [the claimant and his wife] had acquired the caravan with the intention of reducing his capital in order to secure entitlement to housing benefit or to increase the amount of that benefit.’
That concession was relevant in two ways. First, it removed any argument that the value of the caravan should be considered as notional capital. Second, it addressed the qualification to the disregard in paragraph 11 of Schedule 5. 
21.	The final paragraph reads:
‘This therefore once again left only the issue of whether the caravan could be regarded as capital or not. Taking into account R(SB)1/85 and the decision of Bridge J in R v Supp Benefits Comm Ex parte Singer and the fact that this was a static, 4 berth caravan, connected to services, tribunal was of the firm view that the caravan was a capital asset for the purposes of the benefit regulations and its value should therefore be taken into account as a capital resource. Even if the caravan was to be regarded as a personal possession (which in tribunal’s view it was not in that it lacked the element of personal possession) it would be ignored because tribunal accepted that it had not been bought to be able to claim or get more benefit.’
The first two sentences show that, having in the first paragraph quoted correctly identified the issues, the tribunal focused solely on the issue of whether a caravan was capital or not. That, as I explain below, was only an issue because of the confusion of concepts in the submissions to the tribunal. The final sentence is confused. Leaving aside for a moment the words in brackets, the sentence shows that the tribunal misread or misunderstood paragraph 11. The tribunal seems to have lost sight of the fact that that paragraph contains a disregard. Perhaps the tribunal was confusing the qualification to the disregard with the separate issue of notional capital. The words in brackets, taken in isolation, suggest that the tribunal did not consider the caravan to be a personal possession. However, it is not safe to decide this appeal on that basis. I say that for two reasons. First, this conclusion is not explained. Second, in the context of the focus on whether the caravan was capital as the sole issue and the confusion in the rest of the sentence, I cannot be sure that the tribunal correctly directed itself on the meaning and effect of paragraph 11. Those two considerations, especially the latter, persuade me that the tribunal went wrong in law. 
22.	Something has obviously gone wrong with the chairman’s full statement of the tribunal's decision. It is not a typing error. I have checked the original manuscript reasons held in the tribunal’s file and it says exactly the same as the typed version. 
Is the caravan capital? 
23.	Yes, it is. It has to be classified as either capital or income and it is clearly not the latter. It generates no income for the claimant. In financial terms, it is a source of expenditure only. The claimant and his wife make considerable use of it when the site is open and no doubt derive pleasure and relaxation from doing so. But that does not make it income. 
24.	This issue is so clear that it would not be worth discussing were it not for the way that the claimant and his representative presented the arguments on the appeal. This has led to the introduction of concepts that are not relevant under the legislation and to confusion over the meaning of terms.
25.	In his letter of appeal to the tribunal, the claimant emphasised that the caravan was not a second home. He did so, because of the original ground for refusing the claim. The local authority later abandoned that ground and it did not figure in the hearing before the tribunal. 
26.	Later the claimant’s representative drew a distinction between a capital asset and a personal possession. That may have been a convenient shorthand way of referring to the disregard provisions, but it is inaccurate and creates a false dichotomy. A personal possession is one of the disregards under Schedule 5. That Schedule only applies to capital. A personal possession must be capital in order to be subject to the disregard. If it were not, the disregard would not apply. Personal possessions are a subcategory of capital, not a separate category from capital. 
27.	The claimant’s representative has defined a capital asset as an investment, arguing that the caravan was not an investment and therefore not capital. Again, this confuses categories and subcategories. All investments are capital. I note that in a different legislative context, Mr Justice Stamp decided that articles of personal use and investments were not mutually exclusive: Re Reynolds’ Will Trusts [1965] 3 All England Law Reports 686 at 689. But capital is not necessarily an investment. Just to take one example, a social fund payment is disregarded as capital, but no one would describe it as an investment. I do not, therefore, find it either necessary or helpful to consider whether the caravan was or was not an investment. 
28.	The supplementary benefit legislation underlines this last point. Regulation 6 of the Supplementary Benefit (Resources) Regulations 1981, on which Schedule 5 is based, disregarded personal possessions except for certain subcategories, one of which was any personal possessions ‘in the nature of an investment’: regulation 6(1)(c)(i). That recognises that investments are a subcategory of personal possessions. 
If it is, is it a personal possession and as such to be disregarded?
29.	I have come to my answer in this way.
Language and context
30.	I began with the language in its context. 
31.	I have no difficulty with the word ‘possessions’. It is an ordinary word that is well understood. However, like all language, it is used in a context. Its location and the other express disregards suggest that it is something that has a physical existence, not something that is merely a legal right (in legal terms, a chose in action). The caravan is clearly a possession. 
32.	But ‘possessions’ is qualified by the word ‘personal’. To put it another way, I have to interpret the composite expression ‘personal possessions’. That suggests to me a subgroup of possessions. What possessions might there be other than personal ones? 
33.	I have already mentioned investments. These cannot form a wholly separate category of possessions. Many investments will also be personal possessions and it may be difficult, if not impossible, to decide whether the personal or investment element predominates. Possessions that produce income may be readily identified as investments. However, most personal possessions are likely to be held for capital gain rather than income generation. 
34.	Personal might be used in contrast to business assets. That is supported by paragraph 7 of Schedule 5, which specifies these as disregards also. Consequently, if this is the only other category of possessions, it is unnecessary to worry about how to distinguish personal possessions from business assets. 
35.	Personal might also be used in the sense of having a particular personal attachment to the claimant. This seems to be what the tribunal thought. The difficulty is in giving this vague idea a sufficiently precise meaning. The dictionaries I have consulted do not help. The most detailed definition that I have found is the definition of the ‘personal chattels’ in section 55(1)(x) of the Administration of Estates Act 1925:
‘“Personal chattels” mean carriages, horses, stable furniture and effects (not used for business purposes), motor cars and accessories (not used for business purposes), garden effects, domestic animals, plate, plated articles, linen, china, glass, books, pictures, prints, furniture, jewellery, articles of household or personal use or ornament, musical and scientific instruments and apparatus, wines, liquor and consumable stores, but do not include any chattels used at the death of the intestate for business purposes nor money or securities for money’.
That definition reflects the time in which it was drafted and the class of person to whom it was likely to apply. Its legislative context is also very different from the housing benefit legislation. But it gives an indication of the breadth of what possessions with a personal element could encompass. It also reinforces my earlier point that investments and personal possessions could be difficult to distinguish – to take two examples, wines might be held entirely as investments rather than for use while books and pictures might be held for both purposes. 
36.	Two further contextual factors are relevant. One is that paragraph 11 is a disregard of capital. The basic rule is that all capital is taken into account, subject to disregards. Is it rational that everything someone owns is excluded? The other factor is the qualification to the disregard. This is clearly a support provision to the notional capital rule under regulation 43 and operates to prevent avoidance of the capital rules.
Authorities
37.	Having considered the language and context, I considered any relevant authorities. 
38.	The closest authority to the facts of this case is that of Mrs deputy Commissioner Rowley in CPC/0370/2006. That case concerned a static caravan on a private site. The issue arose whether its value could be disregarded as capital for the purposes of state pension credit. The tribunal decided that the caravan was not a personal possession, but more in the nature of a second home. The deputy Commissioner decided that that was wrong in law:
‘9.	There is no definition of “all personal possessions” in the legislation. It has been considered by the learned authors of Sweet and Maxwell’s Social Security Legislation. In their commentary upon the same phrase contained in paragraph 10 of Schedule 10 to the Income Support (General) Regulations 1987, they express the view that “presumably anything which is not real property is a personal possession.” In my judgment that must be right. It seems to me that the intention of the legislation is to distinguish between realty and personalty. The provisions on capital frequently refer to “premises” – there is a range of disregards in respect of “premises” – but where none of these applies, premises fall to be taken into account as capital. Thus, “personal possessions” must mean any physical asset owned by a claimant which cannot be described as “premises.”’
She then went on to give directions for rehearing, telling the tribunal to decide if the caravan had become a fixture on the site. In fairness to the authors of the commentary, I should point out that the quotation is partial. The passage goes on to distinguish between objects and rights. 
39.	As I have already said, there are difficulties with the deputy Commissioner’s reasoning.
40.	The first problem is that the deputy Commissioner assumed that the caravan might be a fixture and therefore real property. In that case, as in this case, the land on which the caravan was sited was not owned by the claimant but by someone else. If the caravan were a fixture, it would have ceased to be owned at all by the claimant and become part of the land owned by the owner of the site. If it were, the claimant would no longer own the caravan. Instead he would have some form of interest in or over the land (which now includes the caravan). I do not consider that that is a realistic analysis of what occurs when a caravan is parked at a particular site.
41.	The second problem is that the deputy Commissioner translated the terms of the legislation into standard classification terms for property and then reasoned from those terms. However, for the most part Schedule 5 is not drafted in terms of the standard legal classification of property. Indeed, for many of the paragraphs the use of such terms is avoided in favour of words such as dwelling, premises, assets and possessions. Moreover, the standard classification is not helpful as leasehold property is, for historical reasons, classified as personalty rather than realty. 
42.	The third problem is that the deputy Commissioner did not address the significance of the word ‘personal’. That issue requires consideration. 
43.	The only other Commissioner’s decision that I have considered in R(IS) 8/04. There Mr Commissioner Mesher dealt with personal possessions, but his discussion contains nothing relevant to the issue I have to decide. 
44.	I have not been able to find any authorities from the courts directly on the meaning of ‘personal possessions’. There are a number of authorities on similar wording. It is sufficient to cite Re Collins’s Settlement Trusts [1971] 1 All England Law Reports 283, which contains quotations from other authorities. Each of those cases depended on its own particular context. I cannot see that they assist me. 
Legislative history
45.	I have also considered the history of the present disregard for whatever it might teach me about its present meaning. 
46.	Before the introduction of housing benefit in 1988, housing support did not take account of capital (Wikeley, Ogus and Barendt, The Law of Social Security 5th edition page 410). There was, therefore, no role for disregards. The history must be found elsewhere. 
47.	The disregard of personal possessions dates back at least to supplementary benefit law. Originally some capital disregards were statutory in Schedules to the Ministry of Social Security Act 1966 (later renamed the Supplementary Benefit Act 1966) and the Supplementary Benefits Act 1976. Personal possessions were not one of the statutory disregards, but were disregarded at the discretion of the Supplementary Benefits Commission. Both the 1974 and 1977 editions of the Supplementary Benefits Handbook record that the Commission ignored personal possessions, but took account of investments. The disregard was first put into legislation in the Supplementary Benefit (Resources) Regulations 1980 and was repeated in the Supplementary Benefit (Resources) Regulations 1981. Regulation 6(1)(c) of the 1981 Regulations provided:
‘(1)	In calculating a claimant’s resources the following shall be disregarded:-
	(c)	the value of any personal possessions except any which-
		(i)	are in the nature of an investment,
		(ii)	have been acquired by converting, for the purpose of acquiring a right to or increasing the amount of supplementary benefit, capital resources which would not have fallen to be disregarded under this paragraph, or
		(iii)	having regard to their nature, use, likely value and the standard of living of other persons in similar circumstances, it would be unreasonable to disregard’.
48.	In the 1988 reforms of social security, the disregard was retained, but subparagraphs (i) and (iii) were dropped. I asked the Secretary of State’s representative about the history of this change. The answer was:
‘I have been unable to locate any of the papers that cover the discussion about the re-wording of the disregard in the change from Supplementary Benefit to IS [income support]. As far as I have been able to ascertain the change reflected difficulties associated with identifying which possessions were “in the nature of an investment” and deciding that it would be “unreasonable” to disregard certain possessions when comparison was made to the standard of living of other people in similar circumstances but, more importantly, reflected the different attitude behind IS, away from the harsher “means” test of Supplementary Benefit – it was accepted that claims would be made by people in very different circumstances and that unless personal possessions held at the date of claim had been acquired with the aim of obtaining or increasing IS entitlement, their value should be ignored. Although it is useful to consider the legislative history in interpreting the present disregard I submit that we are still left with having to interpret the disregard in its current form as pertaining to IS.’
49.	I am grateful to the representative for the research behind this answer. I believe that it is helpful. I must, of course, be wary of assuming a continuity through such wide-reaching reforms as those that came into force in 1988. However, within the major structural changes there was considerable continuity of detailed provisions. On this issue, it is appropriate to have regard to the previous law as an aid to interpreting the present law. First, it shows that practical difficulties of application were relevant. Second, this is linked to certainty in the law as well as in its application. One aspect of this was the removal of areas of discretion, which was a notable feature of the 1988 reforms. Third, it recognises that persons in very different circumstances will apply for benefit. This can change perspective – see below. 
Conclusion 
50.	Housing benefit is classified as an income-related benefit by section 123(1)(d) of the Social Security Contributions and Benefits Act 1992. Despite that, it takes account of a claimant’s capital. The policy evidently is that the excess capital should be used as a source of funds before resorting to state support. 
51.	However, this policy is tempered by other considerations. It is tempered by humanity. Claimants are not expected to reach absolute poverty before claiming. Nor are they expected to dispose of any realisable asset before being entitled to benefit. This is reflected in the capital threshold and in the disregards. The policy is also tempered by practical considerations. Difficulties in distinguishing different types of capital and the uncertainties of classifications that depend on judgment or discretion favour a clear-cut, broad-brush approach that can work to the claimant’s advantage.
52.	In considering the most likely policy in this context, it is relevant to consider the sort of circumstances to which the law might have to apply. It is possible to classify claimants broadly into three categories. The first category consists of people who depend for long periods on various benefits, perhaps for the whole of their adult lives. They will have had little, if any, chance to accumulate valuable possessions.  For them the precise scope of the personal possessions disregard is irrelevant. The second category consists of people who will depend on benefits only during particular intervals, such as a period of sickness or unemployment. They will have had the chance to accumulate valuable possessions. For them it may be inappropriate to expect them to realise assets for what is likely to be short-term support. The third category consists of people who have not previously depended on benefit but who, because of some misfortunate, will now have to depend on benefits in the long-term. For these people, it may be more appropriate to expect them to realise their assets than for those in the second category. This analysis is only theoretical. In practice, it is not easy to identify the category in which a particular claimant belongs. Will a 20 year old claimant always rely on benefit or land a good job within weeks? Will a 50 year old claimant who has become incapable of work recover quickly or not at all?
53.	My conclusion is that ‘personal possessions’ mean any physical assets other than land and assets used for business purposes. This is broadly the same conclusion as that reached by the deputy Commissioner in CPC/0370/2006. It avoids uncertainty of scope and difficulties of application. It is consistent with the legislative history of the disregard and the more humane approach to resource-related benefits that has increasingly been shown over the period of the welfare state. It recognises the increased emphasis that has been given over recent decades to ways of assisting claimants off welfare by not requiring particular categories of possession to be disposed of for what may be a relatively short period on benefit. 
54.	This interpretation does not render the word ‘personal’ redundant. It still has a function in distinguishing between things held by the claimant for personal and business use. 
55.	There is, of course, the risk of abuse in my conclusion. However, the legislation contains the safeguard of notional capital. If personal possessions are disposed of in order to secure or increase entitlement to housing benefit, their value will be taken into account as notional capital. And if something is converted into a personal possession for that purpose, it will be caught by the qualification to the disregard in paragraph 11.
Disposal
56.	On my interpretation of the legislation, the tribunal went wrong in law and I must set its decision aside. The Secretary of State’s representative has argued that there is an issue whether the claimant purchased the caravan in order to secure entitlement to benefit. I would agree with the representative that the issue merits investigation on the evidence, were it not for the fact that the issue was conceded by the local authority at the tribunal. In its final observations, the local authority has repeated that it does not take that point. In those circumstances, I have not directed a rehearing. Instead, I have substituted the decision that the tribunal should have given. 

Signed on original
on 30 November 2007	Edward Jacobs
Commissioner