GP-v-Department for Social Development (IS) [2013] NICom 78
Decision Nos:  C11/12-13(IS) & C12/12-13(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 7 June 2012

DECISION OF THE SOCIAL SECURITY COMMISSIONER

1.	These are appeals by the Department, leave having been granted by the legally qualified member (LQM), from two decisions of a tribunal sitting at Belfast on 7 June 2012.  As they arise from the same set of facts and were decided together by the tribunal, it is appropriate to consider them together.

2.	For the reasons below I allow the appeals.  I direct that the decisions of the appeal tribunal below should be set aside under Article 15(8)(b) of the Social Security (NI) Order 1998 (the Order).  However, I direct that the appeals should be relisted before the identically constituted tribunal for reconsideration under Article 15(9) of the Order.

	Background

3.	The respondent (the claimant) claimed income support (IS) from the Department for Social Development (the Department) from 24 November 1996 in respect of himself, his wife and three children.  He declared in his claim form and in subsequent A2 review forms between 1998 and 2007 that he had no bank accounts or savings.  On the basis of a Generalised Matching Service scan which indicated that he had capital in excess of the prescribed limits, the claimant was interviewed by Benefit Investigation Services (BIS) officers on 5 February 2008.  He stated that he was aware that his wife had savings but that he was not aware of the amount.  On 30 October 2008 the Department decided that the claimant had capital in excess of the prescribed limits on 23 July 2001 and superseded the decision awarding IS with effect from 23 July 2001 until 4 February 2008 (the supersession decision).  By the same decision the Department treated sums transferred to the claimant’s daughter on 4 February 2008 and 16 July 2008 as notional capital.  The claimant appealed.

4.	Subsequently the Department made a decision that IS paid to the claimant between 8 August 2001 and 3 June 2008, amounting to £18,597.90, was recoverable on the basis that it would not have been paid but for the claimant’s failure to disclose that he possessed capital in excess of the prescribed limits (the overpayment decision).  He also appealed this decision.

5.	A tribunal, consisting of a LQM and a financially qualified member, heard and allowed the appeal from the supersession decision, with the consequence that the appeal from the overpayment decision was also allowed.  Statements of reasons for the tribunal’s decisions on the supersession and overpayment appeals were issued on 17 September 2012.

6.	On 4 October 2012 the Department applied to the tribunal for a reconsideration of its decisions under Article 14 of the Social Security (NI) Order 1998.  The claimant’s solicitor made submissions in relation to this application on 5 November 2012.  On 12 November 2012 the LQM declined to set aside the tribunal’s decisions.

7.	On 21 November 2012 the Department wrote to confirm that in the letter of 4 October 2012 leave to appeal to the Social Security Commissioner had been sought in the event that setting aside was refused and to seek clarification of the outcome decision issued in response to that letter.  However, in the meantime on 19 November 2012 the LQM had granted the Department leave to appeal to the Social Security Commissioner from both decisions.  Notification of this determination was issued to the Department on 29 January 2013.  On 26 February 2013 the Department made its appeal from the supersession and overpayment decisions.

	Grounds

8.	The Department submits that the tribunal has erred in law as:

(i)	it erred in determining that an amended form of regulation 23 of the Income Support (General) Regulations (NI) 1987 (the IS Regulations) applied to the claimant;

(ii)	it erred in holding that an overpayment of IS had not been made, whereas overpayment arose from the fact that child dependant increases were not payable to the claimant due to the capital rules relating to children.

9.	The claimant was invited to make observations on the Department’s grounds of appeal.  Through his solicitors he indicated that he did not support the Department’s appeals.

	Relevant Legislation

10.	The issue in this appeal concerns entitlement to a means tested benefit where the claimant or a family member possesses capital.  A relevant starting point is therefore section 132(1) of the Social Security Contributions and Benefits Act (NI) 1992.  This provides:

132.—(1) Where a person claiming an income-related benefit is a member of a family, the income and capital of any member of that family shall, except in prescribed circumstances, be treated as the income and capital of that person.
	(2) …

11.	From 6 April 2004, a relevant provision dealing with income and capital of a child who is a member of the claimant’s family for IS purposes is regulation 23(2) of the Income Support (General) Regulations (NI) 1987 (the IS Regulations).  This reads:

“23.—(1) Subject to paragraph (4), the income and capital of a claimant’s partner which by virtue of section 132 of the Contributions and Benefits Act is to be treated as income and capital of the claimant, shall be calculated in accordance with the following provisions of this Part in like manner as for the claimant; and any reference to the “claimant” shall be construed, for the purposes of this Part, as if it were a reference to his partner.

(2) Subject to the following provisions of this Part, the income paid to, or in respect of, and capital of, a child or young person who is a member of the claimant’s family shall not be treated as the income or capital of the claimant.

(3) …”

12.	However, as will be explained below, the operation of this provision depends on the circumstances of the relevant claim for IS and is subject to transitional rules which were brought into operation by the Social Security (Working Tax Credit and Child Tax Credit Consequential Amendments) Regulations NI 2003 (SR 2003, No.195) (the Amendment Regulations).  I will not set out the precise terms of these regulations.

13.	A further relevant provision is the old form of regulation 17(1)(b) of the IS Regulations.  Prior to 6 April 2004 this read:

17.  Subject to regulations 18 to 22A and 70 (applicable amounts) in other cases and reductions in applicable amounts and urgent cases), a claimant’s weekly applicable amount shall be the aggregate of such of the following amounts as may apply in his case:

	(a) …

	(b) an amount determined in accordance with paragraph 2 of Schedule 2 in respect of any child or young person who is a member of his family, except a child or young person whose capital, if calculated in accordance with Part V in like manner as for the claimant,… would exceed £3,000;

	…

14.	A further provision which existed in the IS Regulations prior to 6 April 2004, and its omission by paragraph 11 of Schedule 1 to the Amendment Regulations, was regulation 47.  This read:

47.  The capital of a child or young person who is a member of the claimant’s family shall not be treated as capital of the claimant.

	The tribunal’s decision

15.	The tribunal found that the sums of money held in bank and building society accounts by the claimant and his partner exceeded the prescribed capital limits for entitlement to IS.  However, on the basis of the oral evidence of the claimant and evidence from an accountant, the tribunal accepted that the sums of money accumulated through payment into these accounts of disability living allowance payable in respect of two of the couple’s children, gifts from relatives and other independent sources.  There were other payments, such as from and to a third child who was not disabled, in respect of her wedding, but the tribunal nevertheless accepted that the capital was held on trust for the children and was not the capital of the parents.  This finding of fact by the tribunal is not challenged by the Department.

16.	The tribunal decided that the claimant did not possess capital in excess of the prescribed limits.  It based its decision upon regulation 23 of the IS Regulations.  In doing so, it accepted submissions that the capital held on trust for the claimant’s children should not be taken into account in assessing his capital.

	Hearing

17.	I held a hearing of the appeal.  The Department was represented by Mr Crilly, Mr Donnan and Mr O’Connor of Decision Making Services.  The claimant was represented by Mr O’Rawe of counsel, instructed by KRW Law.  I am grateful to all involved for the clarity and care of their submissions.

18.	Mr Crilly indicated that the Department did not seek to go behind the main element of the tribunal’s conclusions, namely that the capital of the claimant and his wife was held on trust for their two disabled children.  Nevertheless, he submitted, the tribunal erred in law.

19.	He submitted that the rules of IS were applied differently to persons who had claimed before and after 6 April 2004.  This cut off point coincided with the introduction of the child tax credit (CTC).  For new claims on or after 6 April 2004, no child dependant allowance was included in an IS award, having been replaced by the CTC.  However, what he called “old regime cases” – people who had claimed before 6 April 2004 - continued to receive a child dependant allowance.  Transitional rules had been made to implement the gradual transfer of old regime cases to the new system, but had never been put into operation.  The consequence was that two IS regimes continued in parallel, as far as the issue of treating child dependants was concerned.  IS regulations which had been amended by the Amendment Regulations applied to new cases.  The IS regulations as they were on 6 April 2004 continued to apply to old regime cases.  As the claimant’s case was an old regime case, the claimant having first claimed IS in 1996, the Amendment Regulations did not apply.

20.	Mr Crilly submitted that the tribunal had therefore wrongly applied regulation 23(2) of the IS Regulations as amended by the Amendment Regulations in the particular circumstances of the case.  It had further not addressed the issue implications of the IS rules for child dependants who held capital.  He pointed to regulation 17(1)(b) of the IS Regulations, which had also been omitted by the Amendment Regulations.  He submitted that this provision continued to apply to the claimant’s case.  The logic of the tribunal’s decision was that the claimant did not possess capital but that the children did.  The value of the capital held by the children exceeded £3,000, with the implication that the allowances for child dependants which had been included in the claimant’s IS should not have been paid.  Therefore there were grounds to supersede the decision awarding IS to the claimant, which was still payable to him, but at a lower rate, and a resulting overpayment of a smaller sum than originally calculated.

21.	Mr Donnan set out the Department’s case on the issue of the recoverability of the overpayment.  He referred to the information notes in the IS Order Book until April 2001 and subsequently in instructions issued to the claimants such as the INF4 form at Tab 25 of the tribunal file which indicated the need to disclose children’s savings over £3,000.  He submitted that the claimant had an obligation to notify the Department of the children’s capital under regulation 32 of the Social Security (Claims and Payments) Regulations (NI) 1987.  However, he had failed to disclose it.

22.	Mr Donnan noted that the resulting overpayment related to a period shorter than the terms of the overpayment decision, as it did not extend beyond 5 February 2008.  Whereas the claimant had been interviewed on 2 February 2008, the overpayment decision referred to a period ending on 3 June 2008, when IS payment was suspended.  He submitted that there was no need to consider the principles set out in AJM v Department for Social Development [2013] NI Com 46 at paragraphs 62-76 on the particular facts of this case.  In that case, I held that a claimant could not fail to disclose a material fact which had been put to him by BIS at an interview in the office administering his benefit – as from that point he was aware that the Department knew the material fact which he would otherwise be required to disclose.  Mr Donnan indicated that the Department had elected not to appeal that decision to the Court of Appeal, but that the Department had taken steps to put into operation procedures for BIS to communicate information to Departmental decision-makers at earlier stages of their investigations.

23.	In response to Mr Crilly, Mr O’Rawe submitted that the old regime cases operated under hidden law which was inaccessible.  He submitted that law needed to be accessible, precise and foreseeable, referring to the decision of the European Court of Human Rights in Hentrich v France (Application 13616/88).  That case concerned the issue of whether the exercise of statutory powers of pre-emption, based upon the question of whether a sale price was “too low”, were too imprecise to comply with the principle of lawfulness.  He further relied upon Jahn v Germany (Application 46720/99), a case concerning loss of legal title to land redistributed to farmers under the German Democratic Republic when it was reunited with the Federal Republic of Germany.  Mr O’Rawe further referred me to Stec v UK (Application 65731/01).

24.	In the alternative, Mr O’Rawe pointed out that the old form of the regulations included regulation 47, which was to the same effect as regulation 23(2), and submitted that this would have applied to the claimant, even if regulation 23(2) did not.

25.	He made further submissions to the effect that capital rates affecting adults were increased in 2006, from £3,000 lower limit and £8,000 upper limit to £6,000 and £16,000 respectively.  He submitted that the child rate of £3,000 had remained the same at this time, implying that the changes were discriminatory as they had not increased the relevant child limit.

	Assessment

26.	I cannot accept Mr O’Rawe’s submission that the relevant law is inaccessible.  It is not as simple to access as current legislation generally now is - such as on the internet or in the form of the Great Britain equivalent in Sweet and Maxwell’s social security legislation.  However, it can be located without undue difficulty in old volumes of Sweet and Maxwell or by working through the legislation in a painstaking way in a law library, as lawyers did in the pre-internet age.  The fact that two parallel IS regimes exist, premised on different periods of legislative effect, results from a clear policy to that end.  I understand that it was originally intended to transfer the pre-2004 claimants gradually onto the new system.  However, I further understand that, following a change in government and the introduction of the policy of welfare reform by the current government, it has been decided to wait for the introduction of universal credit instead.

27.	I have looked at Hendrich and Jahn, but I consider that neither case assists me in the present circumstances.  I did not understand Mr O’Rawe to have made the submission that the fact that the particular law was untypically difficult to access meant that it should not be applied.  If he had made such a submission, I could not accept it.  The pre-2004 IS regime is not unlawful for inaccessibility.

28.	Mr O’Rawe submitted that Article 1 of Protocol 1 of the European Convention on Human Rights and Fundamental Freedoms applies to the current case.  In relation to the other authority relied upon by Mr O’Rawe, however, I observe that Stec was decided not on Article 1 of Protocol 1 but on Article 14 discrimination.  Further, I note the decision of the Court of Appeal in McAuley v Department for Social Development (reported as R3/01(IS)) where it was held that arguments in an IS case based upon Article 1 of Protocol 1 were not well-founded.  I do not consider that Mr O’Rawe’s arguments are supported by authority and I do not consider that a violation of Article 1 of Protocol 1 has occurred.

29.	Mr Crilly submitted that the tribunal erred in law by applying regulation 23(2) of the post-2004 IS Regulations to a pre-2004 case.  While Mr Crilly is correct, I consider that Mr O’Rawe is also correct in his submission that if regulation 23 did not apply, then the old regulation 47 of the IS Regulations will lead to the same outcome as reached by the tribunal.  The principle that the children’s capital should not be counted as the capital of the claimant is clear, both before and after the 2004 changes.  This was not a material error of law as the outcome would be identical under the pre-2004 and post-2004 IS Regulations.  However, a more significant matter which the Department says was overlooked by the tribunal is the operation of the old regulation 17(1)(b) of the IS Regulations.  The effect of this provision is that no allowance for a child dependant can be paid where the child possesses capital in excess of £3,000.

30.	I have great sympathy for the tribunal, as the law set out in the Department’s submission before it bore no relationship to the actual issues which the tribunal would have to determine.  As submitted by Mr O’Rawe, it is not an entirely easy matter to otherwise establish the legislative provisions which apply to pre-April 2004 cases.  However difficult it may have been to establish what the relevant law said, the tribunal had to apply the law accurately to the facts which it had found.  It made a particular factual finding which was contrary to that of the Departmental decision-maker.  However, that finding had the further implication that the claimant’s IS should not have contained child dependant elements for each of his children on the basis that they possessed capital in excess of £3,000.  By failing to address the consequences of its finding adequately, and in particular by failing to consider and apply regulation 17(1)(b) of the IS Regulations as it applied to the old cases regime, it has erred in law.  It follows that I must set aside the decision of the appeal tribunal on the basis that it did not apply the relevant capital limits for children.

31.	In that eventuality, Mr O’Rawe challenges the lawfulness of the capital rates applying to children.  He submits that the capital limits for children did not increase when the adult capital limits increased.  I took him to submit that this was discriminatory.  However, the children’s upper capital limit was never aligned to the adult rates.  The children’s upper limit of £3,000 was set when the adult’s lower limit was £3,000 and upper limit £8,000.  The adult lower limit increased to £6,000 in April 2006 and upper limit to £16,000.  The adult is the person who makes the claim for IS on behalf of dependants.  A child cannot make a freestanding claim.  The issue is not therefore differential treatment between adult and child in terms of IS entitlement, but rather the adult is the person ultimately affected by any decision on IS entitlement.  I do not consider that there is merit in this point.

32.	It follows that the decision of the appeal tribunal contains a material error of law and that I must set it aside.

	Disposal

33.	In terms of disposal, the Department has requested that I remit these appeals to a newly constituted tribunal for determination.  Mr O’Rawe for the claimant has requested that I determine the appeals myself.

34.	An effect of referring an appeal to a newly constituted tribunal is that the findings of fact of the previous tribunal are set aside.  Here neither party disputes the tribunal’s findings.  However, the Department’s representatives at the hearing before me have indicated that it is their intention in such an eventuality to advise Departmental colleagues to review the appealed decisions under regulation 3(4A) of the Social Security and Child Support (Decisions and Appeals) Regulations (NI) 1999 on the basis that the factual situation found by the tribunal was the correct one.

35.	A difficult exercise in fact finding is required in order to establish the likely value of the trust capital held on behalf of each of the children.  I am conscious that the tribunal below was (unusually) constituted by a legally qualified member sitting with a financially qualified member.  By taking upon myself the onus of making that decision, I risk straying into an area where I lack the expertise of the tribunal below.

36.	The power to refer under Article 15(8)(b) of the Order, by Article 15(9), is normally exercised by referring to a differently constituted tribunal.  However, in the particular circumstances, I have decided to refer the case back to the identically constituted tribunal as heard the appeal before.

37.	This step is suggested by the fact that none of the parties disagrees with the findings of fact of the tribunal below, the fact that no serious criticism can be directed at the tribunal for failing to apply law which was not argued before it, and the fact that the tribunal is familiar with the case and is constituted to include a financially qualified member.

38.	Therefore, I direct that:

(i)	the appeals shall be relisted before the same tribunal as heard the appeal on 7 June 2012;

(ii)	if the Department has not previously reviewed the issue of the claimant’s capital and accepted that the claimant did not possess the capital but held it on trust for his children, the tribunal shall first address the issue of whether the claimant or his wife possessed capital in excess of the prescribed limits;

(iii)	in that circumstance, the tribunal is not compelled to arrive at the same findings of fact on the issue of the claimant’s capital as it did previously, but should observe that neither party disagrees with that view;

(iv)	in the circumstances that the Department has reviewed its decision to the effect that, or the tribunal finds that, the capital was held in trust for the claimant’s disabled children, and therefore that the claimant’s children had an interest in the capital held on trust for them, the tribunal shall direct its attention to the issue of the value of capital held by the claimant’s children;

(v)	the Department shall prepare a submission for the tribunal dealing with the issue of the capital limit applying to dependant child increases under regulation 17(1)(b) of the IS Regulations as relevant to pre-April 2004 cases;

(vi)	the Department shall include in the submission reference to the principles of valuation applying to capital and in particular to the valuation of a person’s interest in capital held on trust;

(vii)	the Department shall include in the submission references to the principal case-law dealing with valuation of capital held on trust for children, including R11/86 (Supplementary Benefit) and Peters v Chief Adjudication Officer (reported as R(SB)3/89).

(signed)  O Stockman

Commissioner

19 December 2013