LS-v-Department for Social Development (IS) [2012] NICom 327
Decision No: C7/11-12(IS)
SOCIAL SECURITY ADMINISTRATION (NORTHERN IRELAND) ACT 1992
SOCIAL SECURITY (NORTHERN IRELAND) ORDER 1998
INCOME SUPPORT
Appeal to a Social Security Commissioner
on a question of law from a Tribunal's decision
dated 22 March 2011
DECISION OF THE SOCIAL SECURITY COMMISSIONER
- This is an appeal from the decision of the appeal tribunal sitting at Belfast on 22 March 2011, leave to appeal having been granted by the legally qualified member of the tribunal (LQM).
- I held an oral hearing of the appeal on 5 July 2012.
- I allow the appeal for the reasons set out below. Under Article 15(8)(b) of the Social Security (NI) Order 1998, I set aside the decision of the tribunal and I remit the appeal to a newly constituted tribunal with directions for its disposal.
REASONS
Background
- The appellant claimed income support (IS) on 5 September 2008. She indicated in her claim form that she had sold her house on 10 August 2007. While the proceeds of the sale had been substantially in excess of the prescribed capital limit for IS, she now 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.
- 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 because 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.
- 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 appellant received a statement of reasons for the tribunal's decision on 5 September 2011. On 19 October 2011 she applied for leave to appeal to a Social Security Commissioner. Her application was accepted late for special reasons. The LQM granted leave to appeal on 16 November 2011. The appeal was received by the Office of the Social Security Commissioners on 5 December 2011.
Written Submissions
- The appellant is now represented by Mr Allamby, solicitor, of Law Centre (NI). He has submitted the grounds of appeal of her behalf. The grounds of appeal are essentially that:
(i) the tribunal's findings and reasons were inadequate when addressing the question of what constituted actual capital and what constituted notional capital;
(ii) the tribunal applied a test of "reasonableness" when addressing the question of disposal of capital, rather than the correct test of "significant operative purpose" of securing entitlement to IS;
(iii) the tribunal took into account irrelevant considerations with respect to the medical evidence and misdirected itself in its evaluation of the evidence regarding the reasons for the appellant's expenditure of capital.
- The Department was given the opportunity to make observations on the grounds of appeal. On 13 February 2012, Mr Crilly responded for the Department to indicate that the Department did not support the appeal. I will consider the submissions of Mr Crilly, the response of Mr Allamby and further response of Mr Crilly in further detail below.
Relevant legislation
- 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."
- 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."
- 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 of 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)."
The facts in more detail
- It is common case that in 2007 the appellant sold the property which she owned and occupied. She realised the sum of £131,637.06, which came into her possession on 10 August 2007. She had until then been in receipt of IS, which was disallowed from 10 August 2007. Almost exactly one year later, on 7 August 2008, she made a fresh claim for IS. In the claim form submitted on 5 September 2008 she declared possession of capital amounting to £12,718.23. While this figure accurately reflected the amount of capital possessed by the applicant on 20 August 2008, the relevant figure at the date of claim was £14, 481.31.
- The appellant was asked by the Department to provide evidence of expenditure and bank statements. Arising from these the Department treated three separate payments of money to close relatives as notional capital – namely a payment to GP of £1,000 on 10 August 2007, a payment to HP of £1,640 on 10 August 2007 and a payment to SS of £12,000 on 8 April 2008. The three payments totalled £14,640 (GP and HP were the appellant's father and mother, SS was her granddaughter.)
- Also evident from the bank statements was a series of significant withdrawals totalling £65,060. These consisted of a withdrawal referred to in the bank statement as "payment" of £5,000 on 10 August 2007, a withdrawal referred to as "cash" of £6,000 on 29 August 2007, a withdrawal referred to as "payment" of £5,000 in 14 September 2007, a withdrawal referred to as "payment" of £5,750 on 9 October 2007, a withdrawal referred to as "payment" of £22,000 on 29 October 2007, a withdrawal referred to as "payment" of £5,000 on 8 April 2008 and a withdrawal referred to as "Tmg" of £16,310 on 14 April 2008.
- The Department accepted that certain receipted transactions in the amount of £37,455.75 were fully accounted for by the applicant in the relevant period and accepted these as legitimate expenditure by the appellant. However, the Department on 26 January 2009 disallowed the IS claim on the basis that the appellant had capital in excess of the prescribed limits, as she had failed to provide an explanation as to how she spent the balance between the former capital amount of £131,637.06 and the current capital in her possession amounting to £14,481.31.
- A reconsideration decision in much the same terms was issued on 10 March 2009. A further reconsideration was issued on 5 June 2009. This revised the decision on grounds of error of law. The revised decision was to the effect that the appellant was not entitled to IS because:
"she is treated as having actual capital of £79,541.31 and notional capital of £14,640; from 26 January 2009 she is treated as having actual capital of £77,778.23 and notional capital of £14,640 as she deprived herself of this capital for the purpose of securing entitlement to income support. As this capital is in excess of the prescribed limit of £16,000 she is therefore not entitled to income support from 7/08/08".
- The actual capital figure of £79,541.31 is reached by adding the £14,481.31 remaining in the bank account to the "unaccounted for" £65,060. The figure of £14,640 is a separate figure representing notional capital.
The tribunal proceedings and its decision
- The appellant was represented before the tribunal by a different solicitor to the one now representing her. Counsel attended the tribunal hearing on her behalf. I understand that the solicitors attempted unsuccessfully to obtain exceptional legal aid for the present proceedings before passing papers to the appellant's current representatives. The former representatives appear to have given able representation. They submitted medical evidence and evidence of the appellant's actual financial situation as around the date of hearing. They sought to provide an explanation for the withdrawals from the bank account through some receipts but mainly through the oral evidence of the appellant. The main thrust of their submissions was that the appellant was vulnerable to exploitation and prone to reckless spending due to her mental health condition.
- The record of proceedings shows that the appellant explained that she had got into financial difficulties after her husband died in May 2004. She stated that she had borrowed £12,000 from a M…. McK…. but with the rate of interest involved she eventually owed £22,000. She paid him £22,000 from the proceeds of the sale of the house. (I note one withdrawal of £22,000 on 29 October 2007).
- She stated that her nephew and his girlfriend lived with her. They took money out of her account at a time when she was unable to leave the house and took advantage of her. She paid off the debts of another nephew. Her older sister took money from her. She gave a loan of £500 to another person for heating oil and she never repaid it. A friend asked for money for liposuction and surgery. She gave money "in the hundreds" to another person who collected her benefits. She stated that she repaid a sum of £5,000 which she owed to a M…. McC…. who did repairs to the house before she sold it. This was a cash payment on 10 August 2007. (Her counsel was taken by surprise at hearing by this evidence as it had not previously formed part of his instructions).
- Evidence was given of current financial difficulties in the form of rent and utility payment arrears. Evidence was given that the appellant suffered from bipolar affective disorder, had a resulting weakness in regard to spending money, and was vulnerable to being taken advantage of by others.
- The tribunal's statement of reasons for its decision expressly refers to the decision of Chief Commissioner Mullan in C11/10-11(IS), remitting the appeal for re-determination, and the directions given in that decision.
- The gist of the tribunal decision is that the figure of £14,640 for notional capital arises from money the appellant gifted to family members, and that an amount of £65,060 still remains unaccounted for, and "has to be" taken into account when calculating actual capital.
- In the reasons for its decision, the tribunal sets out the evidence of the appellant regarding her disposal of the £65,060 and the £14,640 and rejects the credibility of the appellant and her explanations. The tribunal acknowledges the medical evidence of her mental health problems but finds it to be general and not specific to the appellant and finds that her condition is under good control. In doing so the tribunal notes that there is no referral to a psychiatrist and that there had been no hospital admissions. The tribunal rejects the evidence to the extent that it appears to the tribunal to be making findings of fact which are for the tribunal to make.
- In its concluding paragraphs, the tribunal makes a general finding about the appellant's significant operative purpose being that of making herself eligible for benefit. The tribunal says that it is satisfied that the appellant would not have paid out the money if she knew she was not going to get the benefit to compensate her for its disposal.
Argument
- At the oral hearing of the appeal, the appellant was represented by Mr Allamby and the Department was represented by Mr Crilly. I am grateful to both of these representatives for their considered and detailed submissions.
- Mr Allamby outlined the relevant facts and law and these were agreed by Mr Crilly. He submitted that the tribunal appeared to accept that the appellant still possessed the unaccounted for £65,060 yet did not make a finding as to where or how it had been retained. He submitted that the decision was difficult to follow as it did not address the appellant's explanations of individual instances of where the capital had gone – such as paying a money-lender and to the appellant being taken advantage of by some family members. The decision appeared confused as to what was actual capital and what was notional capital.
- He submitted that the tribunal appeared to address the question of whether the appellant "behaved reasonably in the circumstances" instead of the correct question of whether she had spent money for the purpose of obtaining benefit. He submitted that the tribunal improperly discounted the medical evidence submitted on the appellant's behalf. This indicated that she had bipolar affective syndrome and that this made her impulsive in terms of spending and vulnerable to abuse by others. The tribunal was not entitled to dismiss the medical evidence in the way that it had, on the basis that it was trespassing on the realm of the tribunal. He further submitted that the tribunal was not entitled to draw inferences from the medical evidence as to whether the appellant's condition was well-controlled or otherwise.
- Mr Crilly submitted that the tribunal had followed the relevant case-law in its approach to deciding the appeal, and in particular R(SB)38/85. He submitted that R(SB)38/85 was authority for the principle that failure to account for money which has been disposed of will leave it open to a tribunal to reach the natural conclusion that the claimant still has that resource. He observed that the tribunal's calculation of actual capital was based on adding the amount of capital still held in the appellant's bank account to the sum of £65,060 which was unaccounted for. He submitted that the tribunal did not view the appellant's evidence as credible and that this was a factor in its conclusions regarding actual capital. He submitted that it was open to the tribunal to reject the credibility of the appellant's account of how the money was disposed of.
- In relation to the second ground, Mr Crilly submitted that the tribunal referred to the "significant operative purpose" test, and submitted that the use of the term "behave reasonably" in the context of deprivation of capital was merely replicating language used by a Commissioner in CH/187/2005. Mr Crilly submitted that the tribunal was entitled to reach its conclusion in relation to notional capital, and that it was entitled to find that the applicant's significant operative purpose in depriving herself of capital was to secure benefit entitlement.
- In terms of the treatment of medical evidence, Mr Crilly submitted that the tribunal accepted the evidence as regards the appellant's medical condition. He submitted that the tribunal was entitled to come to the view that her condition was well-controlled. The tribunal's assessment of the medical evidence was not perverse and it was entitled to draw the inferences it did as to the state of the appellant's illness during the period under consideration.
- In response, Mr Allamby reiterated his point about the tribunal's reasons and submitted that there was a lack of findings as regards specific explanations given by the appellant for the whereabouts of spent capital. He relied on R(H)1/06 and CH/0264/2006. He maintained that the tribunal had not adopted a proper approach in its rejection of the medical evidence.
- Mr Crilly in turn submitted that the tribunal had considered the individual amounts which make up the figure of £65,060. He submitted that R(H)1/06 and CH/264/2006 were cases dealing with notional capital and not therefore directly of assistance. He maintained that the tribunal had adopted the correct approach to notional capital and to the medical evidence.
Assessment
- I turn firstly to the decision of former Chief Commissioner Martin in R2/09(IS). At paragraph 17 of his decision, the Chief Commissioner sets out guidance for tribunals dealing with issues of capital. I do not need to set out all the aspects of that guidance but will refer to a few relevant passages.
- Where, as here, capital is relevant to the benefit rules the Chief Commissioner indicates at (iii) that the tribunal should ask, "Is the capital in the case actual capital? And if so, [the tribunal should] identify the actual capital". More relevantly he further poses the question at (ix) "Did the claimant ever have capital which might have affected entitlement to the benefit in question?" and at (x) "Has it been established that the claimant still has that capital? i.e. is it still actual capital?". Later at (xv) he asks "… has the claimant deprived himself of the capital for the purpose of securing entitlement to benefit in line with the rules on deprivation? i.e. has it become notional capital?" and (xvi) "What is the value of the notional capital, taking into account the diminishing notional capital rule? i.e. has the value diminished over the passage of time?".
- In granting leave to appeal the LQM has accepted that it is arguable that the tribunal has not had regard to the guidance in R2/09(IS) and has given no consideration to the question of what constitutes actual capital, for example whether the appellant still had the money unaccounted for as actual capital or whether the failure to effectively account for the money constitutes notional capital. Mr Allamby submits that the tribunal decision does not make that distinction and that this amounts to an error of law.
- In response, Mr Crilly relies upon R(SB)38/85. He submits that this makes clear that if a claimant is unable to satisfactorily show that he has actually disposed of a capital resource, then that capital resource will continue to be regarded as actual capital for benefit purposes. He submitted that the tribunal had distinguished between actual capital and notional capital in its decision. Mr Crilly relies on a passage at paragraph 18 of R(SB)38/85 which reads:
"Once it has been shown that a member of the assessment unit has recently received, or otherwise been the owner of, a capital resource … the onus of proving, on a balance of probability, that he no longer has that resource rests on the claimant, since it is for him to establish title to supplementary benefit. In the present case, it is not in dispute that the claimant received £18,700 … from a London Borough on the compulsory purchase of a house of his in November 1982. Supplementary benefit was in payment to him up to November 1982. From the time he received the money, his capital resources were clearly above the prescribed limit of £2,500 …. set out in regulation 7 of the Supplementary Benefit (Resources) Regulations 1981. The claimant says that he expended this sum of £18,700 in repaying loans. It is for him to prove that this is so. Failing a satisfactory account of the way in which the money has been disposed of, it will be open to the tribunal, and a natural conclusion, to find that the claimant still has, in some form or other, that resource and consequently to conclude that his actual resources are above the prescribed limit."
He submits that here the unaccounted for sum of £65,060 was properly treated as actual capital as the tribunal did not accept that the appellant had proved that she no longer has the capital.
- R(SB)38/85 concerned a claimant who had received the sum of £18,700 by way of compensation for the compulsory purchase of his home. This exceeded the capital threshold for supplementary benefit by a long way. He claimed to have repaid amounts from £800 to £7,000 to six different creditors, borrowed to pay costs in a court case in Pakistan and to pay for his daughter's wedding. The tribunal upheld the decision of the Department that the claimant in the case had capital in excess of the prescribed limit. The Commissioner overturned the tribunal decision, principally on the basis that the tribunal had made inadequate findings of fact. He directed that the new tribunal should ask to see contemporaneous receipts for the sums allegedly paid and ask for oral evidence from the alleged lenders. Evidence of the court costs should be sought. After investigation the tribunal was directed to make specific findings on whether there were in fact loans to be repaid, how much was repaid, to whom and on what date. If the tribunal was satisfied that the claimant had deprived himself of a resource, then it should proceed to consider the question of whether he had deprived himself of a resource in order to secure supplementary benefit or increase the amount of such benefit.
- Baroness Hale at paragraph 61-62 of Kerr v Department for Social Development ([2004] UKHL 23, also reported as an annex to R1/04(SF)) re-stated the principle that the process of benefits adjudication is inquisitorial rather than adversarial. In determining entitlement to benefit, both the claimant and the Department must play their part. The Department is the one which knows what questions it needs to ask and what information it needs to have in order to determine whether the conditions of entitlement have been met. The claimant is the one who generally speaking can and must supply that information. It appears to me that the approach set out in R(SB)38/85 above is consistent with the approach advocated in Kerr and remains the correct one.
- The tribunal needed to first satisfy itself whether, on the balance of probabilities, the appellant still possessed the capital she said she no longer had. The tribunal says in its statement of reasons "An amount of £65,060 still remains unaccounted for and this figure has to be taken into account when calculating her actual capital" (my emphasis). If the tribunal meant by this that it understood the law to require it to take into account the £65,060, I consider that this would have been in error of law. The gist of R(SB)38/85 is that it is open to a tribunal to make such a finding, not that it is required to do so.
- An aspect which I found troubling, and which was not satisfactorily answered at hearing, was whether the tribunal considered that the appellant continued to possess the £65,060. Was it the case that it considered, metaphorically, that she still had it in a shoebox under her bed? Alternatively, did it consider that the money had been spent, but not in the ways claimed? If so, did it consider that it was obliged by law to find that the appellant still possessed the money, albeit not as notional capital but as actual capital? The tribunal nowhere made a positive finding to the effect that the appellant still possessed the capital. There were no findings as to the evidence of the appellant being in financial arrears in early 2011 in relation to rent and utilities, which was advanced to show that the appellant no longer had any capital. The issues of actual capital and notional capital in the present case tended to blur into each other.
- What might have made the tribunal's findings more explicit would have been a series of findings such as advocated by the Commissioner in R(SB)38/85. The appellant's case was that the £65,060 had gone in the form of a number of specific payments – such as that of £22,000 to Michael McKeown on 29 October 2007 and that of £5,000 to Martin McCourt on 10 August 2007 – as well as other payments to relatives. Rather than address the global figure of £65,060, I consider that R(SB)38/85 required the tribunal to investigate the particular circumstances of each of the seven individual withdrawals over the 11 month period before making findings. In failing to do so, I consider that the tribunal did not comply with the guidance of R(SB)38/85 or of R2/09(IS). In failing to follow that guidance, I consider that the tribunal has erred in law on the basis that it has not made adequate findings of fact.
- I consider that while the legal issues are different, similar principles have to be applied in the case of notional capital, in terms of examining individual instances of deprivation of capital. The tribunal found that the applicant had deprived herself of a global sum of £14,640 for the purpose of securing entitlement to IS. The significant operative purpose test was correctly identified by the tribunal. However, the tribunal did not separate the individual elements making up the figure of £14,640. I consider that this was an error of law. There is a considerable difference between the gift of £1,000 to a parent, made on the day of receipt of the proceeds of sale of the house - an amount which makes no significant difference to the extent by which the capital exceeded the prescribed amount - and a gift of £12,000 to a grandchild some six months later when the capital had already diminished by some £73,000. It is not sufficient to lump them together as if they were one single event of intentional deprivation of capital, when the significant operative purpose for each gift could be very different.
- If the tribunal had considered that the appellant did not still possess the £65,060 unaccounted for capital at the date of claim, the question of whether it potentially amounted to notional capital would logically have arisen. Therefore, if the tribunal was wrong in considering that the appellant continued to possess actual capital, was there any material error in the tribunal's decision? Again, for the reasons given above, there was error in that the individual instances of deprivation of capital would have needed separate consideration against the appropriate statutory test.
- Furthermore, for the appellant, Mr Allamby has argued that the tribunal erred in its approach to the medical evidence which showed that the appellant suffered from bipolar disorder. He submitted that the evidence showed that persons suffering from such a disorder typically experience periods of euphoria and over activity with grandiose behaviour and thought processes. Evidence suggested that "it is not unusual to find the sufferer spending large sums of money in a reckless and disinhibited manner". Mr Allamby submitted that the tribunal was not entitled to find that the appellant's condition was under good control. The tribunal found that the appellant had not been admitted to hospital and was not under psychiatric care. In fact, evidence in the claim form showed that the appellant had been admitted to hospital in November-December 2006 and a letter from her previous solicitor indicated that she was under psychiatric care. In the light of this evidence, I consider that it is arguable that the aspect of the appellant's mental health does require attention when addressing the question of intentional deprivation of capital and that the tribunal did not give sufficient regard to it. As I am allowing the appeal on other grounds, however, I do not need to give full consideration to this aspect of the appeal.
Disposal
- If allowing the appeal, Mr Allamby has asked me to decide the appeal myself. Mr Crilly on the other hand submits that it needs to be remitted to a newly constituted tribunal. I agree with Mr Crilly's submission, as I consider that there are benefits to enabling further relevant evidence to be put before a new tribunal.
- I set aside the decision of the tribunal. I remit the appeal to a newly constituted tribunal. I direct that the new tribunal should address the questions given as guidance by former Chief Commissioner Martin in R2/09(IS).
- The tribunal is directed to have regard to each element of the unaccounted for sum of £65,060 and to investigate the circumstances on the basis that it is for the appellant to establish what has happened to the money withdrawn from her bank account on each occasion.
- This will require a consideration of the explanation given by the appellant and of any documentary material which she can provide to substantiate the likelihood of her account.
- The tribunal will note that it is not required to find that the appellant continues to possess any capital unaccounted for but that, if it is satisfied in the absence of credible explanation that the appellant still possesses the capital, it may be open to it to find that the capital is still in her possession.
- If the tribunal is satisfied that the appellant still possessed capital other than stated in the claim form at the date of claim it shall make all relevant findings of fact.
- If the tribunal is not satisfied that the appellant still possessed capital other than stated in the claim form at the date of claim it shall assess whether the appellant should be treated as possessing capital under the notional capital rule.
- It is not for me to advise the appellant on how to present her case. However, it would seem prudent that the tribunal should be assisted in investigating the circumstances of the appellant in considerable detail, including documentary and oral evidence of her financial circumstances leading to the sale of her home in August 2007, documentary and oral evidence of her financial circumstances from the date of decision to the present, documentary and oral evidence of expenditure between August 2007 and August 2008 other than that explained through her bank statements such as in relation to holidays abroad, documentary and oral evidence of consistent past episodes of extravagant expenditure; and detailed medical evidence relating to the symptoms of her mental health condition said to be relevant to the present appeal and relating to her treatment.
(signed): O Stockman
Commissioner
19 September 2012
