THE UPPER TRIBUNAL

ADMINISTRATIVE APPEALS CHAMBER

UNANIMOUS DECISION OF THE UPPER TRIBUNAL

Before: P  L Howell QC, H  Levenson, A  J Gamble

Attendances: 

For the Appellant:  (Claimant):

The claimant attended in person accompanied and assisted by Mr A Murdie, a McKenzie friend

For the Respondent: (Secretary of State for Work and Pensions):

Mr C Hedley, DWP, Legal Group,

The claimant’s appeal is allowed.

The decision of the Colchester First-tier Tribunal of 29 September 2009 is set aside. 

That decision is remade as follows:

On 10 August 2007 (the date of the claimant’s claim to Jobseeker’s Allowance) the claimant possessed capital valued at £5,705.19.

No amount of tariff income thus fell to be applied in the calculation of his entitlement to income based Jobseeker’s Allowance between 10 August 2007 – 15 September 2008.

The case is remitted to the Secretary of State for Work and Pensions to recalculate the claimant’s entitlement to income based Jobseeker’s Allowance in the above period and to calculate any resulting arrears and pay them to the claimant. 

REASONS  FOR  DECISION

1.	The claimant applied by telephone for Jobseeker’s Allowance on 10 August 2007.  Shortly thereafter he provided the department with details of the balances of his three bank accounts, all with Barclays Bank. He had a nil balance in a Cash Card account.  There was a credit balance of £7,700.09 in his Bonus Saver account.  His Student Additions account was overdrawn by £1,994.90.

2.	On 13 December 2007, a decision maker, acting on behalf of the Secretary of State, awarded the claimant income based Jobseeker’s Allowance from his date of claim.  In that decision the decision maker held that the claimant possessed capital of £7,700.09.  As that figure was in excess of £6,000, he applied regulation 116(1) of the Jobseeker’s Allowance Regulations 1996, producing a tariff income of £7 per week in the calculation of the claimant’s entitlement to benefit.

3.	On 26 October 2008, on receipt of verified information that the claimant’s capital had fallen below £6,000 a decision maker held that a tariff income did not fall to be applied to the claimant from 16 September 2008.  However he refused to alter the decision of 13 December 2007.  That decision therefore applied between 10 August 2007 and 15 September 2008.

4.	On 12 May 2009, the claimant appealed against the application of a tariff income in the calculation of his benefit entitlement in the above period.  His argument, simply put, was that his net capital i.e. the sum produced by the deduction of his overdraft from his credit balance should have been used as the amount of his capital.   

5.	The tribunal of 29 September 2009 confirmed the decision maker’s decision of 13 December 2007.  The District Tribunal Judge who constituted it held that he was bound by the decision of the Tribunal of Commissioners in R(SB)2/83 to decide that it was the gross value of the claimant’s capital, without any deduction for the amount of his overdraft, which fell to be applied in calculating his entitlement to income based Jobseeker’s Allowance.  

6.	The claimant now appeals with the permission of the District Tribunal Judge.  His appeal is not supported by the Secretary of State.

7.	Upper Tribunal Judge Rowland, acting under powers delegated by the Chamber President, directed an oral hearing before a panel of three judges.  We constituted that panel.  The hearing took place before us in London on 26 October 2010.  Attendance is narrated above.  We are grateful to the claimant and Mr Hedley for their contributions to an interesting and good natured discussion.  

8.	On 28 September 2010, prior to the oral hearing, Upper Tribunal Judge Howell QC had issued a direction to parties which inter alia directed the claimant to lodge copies of the bank mandate agreements and all applicable bank terms and conditions as at August –December 2007 relating to each of his Bonus Saver savings account and his Student Additions current account.  Regrettably, that direction does not appear to have been issued to the claimant.  He informed us at the oral hearing that he had never received it.  We had no reason to disbelieve him.  Certainly the direction was not implemented by him.

9.	At the hearing, when we received the above information from the claimant we indicated to him and Mr Hedley that we were minded to issue further directions seeking the production of the above documents.  At the conclusion of the hearing, we indicated orally that we wished them to be produced.  We followed this up with a written direction, signed on our behalf by Upper Tribunal Judge Howell QC, dated 26 October 2010.  That direction reads as follows:

“1.	This is to confirm the directions given orally at the conclusion of the hearing today.

	2.	Within one month of today (that is by 26 November 2010) the claimant is to lodge with the Upper Tribunal (Administrative Appeals Chamber) Office:

(A)	copies of the bank mandate agreements, and all applicable bank terms and conditions as at August-December 2007, relating to each of:

(1)	his  “Bonus Saver”   savings   account  with  Barclays  Bank  20-22-69 No. [****], and

(2)	his  “Student  Additions”  current   account   with   Barclays  20-22-69 No. [****];

				together with

		(B)	any supplemental written submissions he wishes to make on the appeal, in particular on the effect of any rights of set-off or combination of those accounts the Bank may have had under any express contractual term or at common law, and the extent if any to which any such right gave rise at the time relevant for these proceedings to an “incumbrance secured on” the gross credit balance of the savings account within regulation 111(b) of the Jobseeker’s Allowance Regulations 1996 SI No 207.

	3.	These documents are to be copied by the Office to the Secretary of State’s solicitor and the Secretary of State is then to make any supplemental written observations he wishes  on  the  appeal, so as to be received within a further 14 days thereafter; those further observations to be copied by the Office to the claimant.

	4.	We will then proceed to determine the appeal as soon as possible and without any further oral hearing unless an application is made or direction given for a further hearing for some specific reason: any such application must be made promptly and explain what the reason is.”

The above direction essentially repeated the directions given to the claimant by the direction of 28 September 2010 summarised in paragraph 8 above.  

10.	The claimant responded fully to the above direction by producing the relevant documents relating to both of the accounts specified in it along with helpful written legal submissions.  No “supplemental written observations”  (referred to in paragraph 3 of the above direction) have been lodged by the Secretary of State.  The date for him doing so passed some time ago.  In these circumstances, we now decide the appeal.  

11.	In our view, the key issue in these proceedings is clearly the calculation of the claimant’s capital.  The relevant statutory provision is regulation 111 of the Jobseeker’s Allowance Regulations 1996.  That regulation provides as follows:

	“Calculation of Capital in the United Kingdom

111.	Capital which a claimant possesses in the United Kingdom shall be calculated at its current market or surrender value less -

		(a)	where there would be expenses attributable to sale, 10 per cent;

			and

		(b)	the amount of any incumbrance secured on it.”

The sum calculated by application of the above provision is the sum which falls to be used for the purposes of the application (or not) of a tariff income under regulation 116(1) of the above Regulations.  That paragraph fixes a figure of £6,000 for that purpose.  

12.	In our view, the tribunal in refusing the appeal overlooked the crucial fact that the claimant’s capital consisted of bank accounts with the same bank.  He was actually both a creditor and a debtor of the same body, unlike the situation which arose in R(SB)2/83.  In these circumstances, they should have sought production of the terms and conditions applicable to the relevant accounts, adjourning if necessary to do so.  They should have then  taken account of the meaning and effect of those terms and conditions in calculating “the current market … value” of the claimant’s capital consisting of the balances of those accounts for the purposes of regulation 111.  In failing to proceed in that manner the tribunal erred in law.  

13.	We are also satisfied that it is appropriate for us to set the tribunal’s decision aside, in the exercise of our discretion under section 12(1) and (2)(a) of the Tribunals, Courts and Enforcement Act 2007, on the basis of the error of law specified in paragraph 12 above.  So far as disposal of the appeal is concerned, we consider that it is expedient for us to remake the tribunal’s decision under section 12(2)(b)(ii) of the above Act. There is ample material on  file enabling us to do so.  

14.	We have perused the “Terms and Conditions.   Retail Customer Agreement” issued by Barclay’s Bank in February 2007, applicable on 10 August 2007 and 13 December 2007 which was lodged by the claimant pursuant to our direction of 26 October 2010.  In particular, we regard the provisions of clause 7.6 of that Agreement which appears under the heading “7.  Borrowing from us” as very significant.   That clause provides as follows:

“7.6	You authorise us to debit any account with us in any currency to reduce or repay any amounts you may owe us in any account (including on card accounts you hold with us, and any other amounts you may owe us) either in your own name or jointly with anyone else.  We will tell you if we do this”.

15.	Clause 7.6 is expressed in commendably clear language.  In our opinion, as a matter of law, it confers a contractual right on the bank as creditor to debit at any time any of a customer’s accounts with them which are in credit with funds sufficient to reduce or indeed completely repay any indebtedness which that customer may have to the bank.  It thus creates what is effectively a charge on the customer’s credit balance or balances.  In this case, Barclays could at any time have cleared the overdraft in the claimant’s Student Additions current account by debiting his Bonus Saver account.  

16.	In our view, the presence of clause 7.6 in the bank’s Terms and Conditions must affect the valuation of the balance of the claimant’s Bonus Saver account.  We are required by regulation 111 to apply the “market value” of that balance.  We hold that in doing so we must take account of the fact that the sum in credit in the above account was subject to clause 7.6 which, as we have emphasised in paragraph 15 above, empowers the bank to compulsorily debit it at any time with sums sufficient to clear the claimant’s overdraft indebtedness.  We therefore hold that the “market value” of the balance in the above account is its net value after deduction of the amount of the claimant’s overdraft in his Student Additions account. Thus for the purposes of regulation 111, at 10 August 2007 the market value of the claimant’s Bonus Saver account was £5,705.19.  Therefore no tariff income was applicable to the claimant in the calculation of his entitlement to income based Jobseeker’s Allowance as that sum is less than the figure of £6,000 specified by regulation 116(1).  

17.	Having decided the case on the basis described in paragraphs 14-16 above, it becomes unnecessary for us to comment on other interesting and important questions raised in the written submissions of both parties and at the oral hearing.

18.	The claimant’s appeal is unanimously allowed in the manner laid out in the decision.  

			P  L  Howell

			H  Levenson

			A J Gamble

			Judges of the Upper Tribunal
			10 February 2011