Northern Ireland - Social Security and Child Support Commissioners' Decisions

GE-v-Department for Communities (PC) [2016] NICom 73

 

Decision No: C3/15-16(PC)

 

 

 

 

SOCIAL SECURITY ADMINISTRATION (NORTHERN IRELAND) ACT 1992

 

SOCIAL SECURITY (NORTHERN IRELAND) ORDER 1998

 

 

PENSIONS CREDIT

 

 

Appeal to a Social Security Commissioner

on a question of law from a Tribunal's decision

dated 1 September 2015

 

 

DECISION OF THE SOCIAL SECURITY COMMISSIONER

 

 

1. This is the Department for Communities (the Department's) appeal from the decision of an appeal tribunal sitting at Belfast.

 

2. For the reasons I give below, I disallow the appeal.

 

REASONS

 

Background

 

3. The respondent claimed state pension credit (PC) from the Department and an award was made from 21 January 2008 - the Monday following her 60 ^th birthday. On 2 August 2011 the Department contacted the respondent by telephone in the course of a review of her entitlement. She stated that she had separated from her husband many years before and that he continued to live in a property they had bought together. On 5 April 2013 the Department contacted the respondent again by telephone for the purpose of a further review of her PC entitlement and in the course of the conversation she stated that she had an interest in the property. She was asked to complete an A64A form. She returned this on 17 April 2013. She stated that she was not taking steps to dispose of the property, that she had resided there until 1996, when she and her husband separated, and that she did not intend to live there again. She stated that her husband was not willing to buy her share or to sell the house.

 

4. On 5 February 2014 the Department re-assessed the respondent's entitlement to PC to take the capital value of the house into account. On 8 June 2014 the Department decided that the respondent was entitled to a reduced amount of PC from 21 January 2008 and superseded her award. On 23 September 2014 the Department decided that the respondent had been overpaid PC amounting to £2,906.39 from 21 January 2008 to 14 April 2013. The Department decided that the overpayment was recoverable from the respondent on the basis that she "had misrepresented the material fact that she held a share in her previous marital home". The respondent appealed the decisions on her entitlement to PC and on the recoverability of any overpaid PC.

 

5. The appeals were considered by a tribunal consisting of a legally qualified member (LQM) sitting alone on 1 September 2015. The tribunal allowed the appeal on the question of entitlement to PC and (inevitably therefore) on the question of the recoverability of the overpayment. The Department then requested a statement of reasons for the tribunal's decision on the entitlement decision and this was issued on 4 November 2015. The Department applied to the LQM for leave to appeal from the entitlement decision of the appeal tribunal, and leave to appeal was granted by a determination issued on 15 December 2015. In granting leave the LQM formulated the question:

 

"Was the tribunal correct in deciding on the facts of this case, that the appellant's interest in her former matrimonial home is of little or no value to the extent that it does not affect her entitlement to benefit?"

 

6. On 16 December 2015 the appeal was lodged in the Office of the Social Security Commissioners.

 

Grounds

 

7. The grounds of appeal submit that the tribunal has erred in law on the basis that:

 

(i) the tribunal erred in law by holding that the respondent's share in the matrimonial home had little or no value;

 

(ii) the tribunal had erred in law by failing to consider the evidence of valuation of the property submitted by the Department.

 

8. The respondent was directed to make observations on the appellant's grounds. She responded and submitted that the tribunal had not erred in law as alleged and indicated that she did not support the appeal.

 

The tribunal's decision

 

9. In determining the appeal, the tribunal had before it a Departmental submission including a valuation of the property part owned by the appellant, which had been prepared by Land and Property Services (LPS). The appellant attended and gave evidence at the tribunal hearing. She stated that she had been living as a tenant of the Northern Ireland Housing Executive (NIHE) property with her husband from 1977. In 1995 they bought the property. In 1996 they separated and she left the home, while her husband continued to live there. The mortgage was paid off by 2007 when her husband turned 65. She made some payments after she left the home. She stated that the property was owned 50:50 and that she and her husband were tenants in common. The Department relied on the valuation evidence from LPS.

 

10. The tribunal accepted that the appellant was an honest witness, although she had not declared ownership of the property when she claimed PC. The tribunal considered that the valuation provided by LPS had addressed the value of the property and took no issue with that. However, it assessed that the proper approach was to value the appellant's interest in the property - not the property itself. The tribunal assessed that the appellant's interest in the property had little or no value as it was unlikely that a court would enforce a sale and that there was no evidence of a willing buyer. The tribunal found the Department's evidence of valuation to be unrealistic, as it did not fully take into account the difficulties in realising the value.

 

Relevant legislation

 

11. The relevant legislation in the present appeal appears at regulation 19 of the State Pension Credit Regulations (NI) 2003. This provides as follows:

 

Calculation of capital in the United Kingdom

 

19. 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 encumbrance secured on it.

 

12. For completeness, I would point out that the Department adopted the approach that a further provision, regulation 23 of the PC Regulations had no application to the particular case. This provides that:

 

23. Where a claimant and one or more persons are beneficially entitled in possession to any capital asset they shall be treated as if each of them were entitled in possession to the whole beneficial interest therein in an equal share and the foregoing provisions of this Part shall apply for the purposes of calculating the amount of capital which the claimant is treated as possessing as if it were actual capital which the claimant does possess.

 

 

 

Submissions

 

13. The Department submitted that the respondent and her husband were tenants in common of the property in issue. This meant that they each possessed a disposable half share in the property. The Department accepted that the issue was not determining the value of half of the total value of the capital asset, but determining the value of the respondent's half share. This took into account the fact that her husband was in occupation and unwilling to sell. The Department submitted that the respondent's half share had been valued appropriately by LPS.

 

14. The Department submitted that the LPS valuation took into account a number of relevant factors. These were the fact that the other tenant was in continuing occupation, was in poor health and was not in a position to buy the respondent's share. It was acknowledged that the respondent was unlikely to realise her interest until after the death of her husband. The Department submitted that these factors had a depressive effect on the value of the respondent's interest which had been taken into account. The Department submitted that the tribunal had been aware of these factors and had set them out in its decision. However, the tribunal appeared to ignore that these had been reflected in the LPS valuation.

 

15. The Department submitted that this was not a case in which regulation 23 was relevant, as regulation 23 would only apply in the case of a joint tenancy, rather than a tenancy in common.

 

16. The Department submitted that the tribunal had erred by relying on Palfrey v Chief Adjudication Officer (reported as R(IS)26/95), which concerned a joint tenancy rather than a tenancy in common. The Department submitted that the tribunal had confused the principles applying in the different cases of joint tenants and tenants in common.

 

17. The Department submitted that the tribunal had erred when it indicated that there was no evidence of any buyer willing to purchase the respondent's half share and by failing to accept the merits and accuracy of the LPS evidence.

 

18. The respondent took issue with the Department's reliance on evidence submitting that her husband had a short time to live but understandably did not engage with the relevant legal issues.

 

Hearing

 

19. I held an oral hearing of the appeal. The Department was represented by Mr Gough of DMS. The respondent did not attend, but wrote to indicate that she was happy for the appeal to proceed in her absence. I am grateful to Mr Gough for his clear and helpful submissions.

 

20. Prior to the hearing the respondent made a factual submission to the effect that until May 2010 she and her husband had been joint tenants rather than tenants in common. No reason was advanced by her for the change in the legal nature of the ownership of the property.

 

21. Mr Gough candidly admitted that the position of joint owners of property was a problematic area for the Department. He emphasised that PC was a means tested benefit. Therefore public policy did not intend people with significant capital to receive it without some adjustment to take account of their capital. He indicated that the Department had followed the guidance of the Commissioners and Courts in seeking to achieve realistic valuation of the capital held by claimants. A realistic valuation had been advanced to the tribunal. However, he submitted, the tribunal had not accepted that evidence.

 

22. He accepted that the question was whether the tribunal had irrationally rejected the evidence before it. However, he also submitted that the tribunal had applied the wrong legal principles to the case, citing Palfrey v Chief Adjudication Officer as it did, which was concerned with joint tenants, whereas this was a case of tenants in common.

 

23. I asked Mr Gough about the significance of the statement by the respondent that until May 2010 she and her husband had been joint tenants. Mr Gough pointed out that in an April 2103 enquiry form the respondent indicated that she and her husband were tenants in common. He further pointed out that in September 2015 she had stated that they were tenants in common in her oral evidence to the tribunal. While it was not a submission which had been advanced previously, and therefore some opportunity to clarify the circumstances should perhaps be given to the respondent, he observed that the Department was not pursuing the overpayment aspect in the appeal and therefore no recovery was sought. In that sense, it would have no material effect in terms of the financial consequences for the respondent. He further accepted that the value of a joint tenancy would be less than that of a tenancy in common, and therefore that at least for the period from January 2008 to May 2010, there would be little material difference between the tribunal's valuation and what the Department was likely to assess in the case of a joint tenancy.

 

24. I considered that the new factual submission by the respondent would have little material impact on the issues before me and I decided not to adjourn to investigate the circumstances further.

 

Assessment

 

25. This appeal concerns the assessment of the capital held by a PC claimant. Regulation 15(2) of the PC Regulations provides that a person's capital shall be deemed to yield him income at a prescribed rate. By regulation 15(6) of the PC Regulations £1 is deemed to be the weekly income for each £500 or part of £500 which the claimant possesses in excess of £10,000. The issue in dispute before the tribunal was the valuation of the amount of capital possessed by the respondent, and consequently what deemed income she had from that capital.

 

26. The respondent's capital consisted of a part ownership of a property which was her former matrimonial home. The Department had obtained a valuation of the interest in the property and calculated a reduced PC entitlement on the basis of that valuation. The Department had further assessed that the respondent had received an overpayment of PC and was liable for the overpayment's recovery. However, the issue of overpayment recovery has not been pursued and is not before me. I am concerned solely with the entitlement aspect of the case.

 

27. The Department submits that regulation 19 of the PC Regulations is the only relevant provision and that regulation 23 in particular does not apply. Regulation 23 is the PC equivalent of an older provision - regulation 52 - in the Income Support (General) Regulations (NI) 1987 (the IS Regulations). This provides that "where a claimant and one or more persons are beneficially entitled in possession to any capital asset" they shall be deemed to possess the whole beneficial interest in an equal share.

 

28. In Hourigan v Secretary of State for Work and Pensions [2002] EWCA Civ 1890 the Court of Appeal in England and Wales confirmed that regulation 52 of the IS regulations, the direct equivalent of regulation 23 of the PC regulations, has no application to a tenancy in common where there is no unity of beneficial interest with another or others in the capital in question. Mr Gough submits on this basis that regulation 23 has no relevance to the present case, in so far as it concerns a tenancy in common, and I accept that submission.

 

29. The first submission of Mr Gough is that the tribunal has erroneously relied upon Palfrey v Chief Adjudication Officer, a case of a joint tenancy. The tribunal has stated in its reasons "Considered: Palfrey v Chief Adjudication Officer 1995". However, it is not evident that the tribunal has drawn any particular principle from Palfrey or misapplied it to the facts of the case. The Department would not differ from the principle derived from Palfrey and applied by the tribunal that it is the value of the respondent's half share of the property rather than half of the value of the whole property that falls to be considered. I do not consider that it is evident that the tribunal has drawn any impermissible principle from Palfrey and erred in law on the basis submitted.

 

30. The crux of the Department's submission is the tribunal's treatment of its expert evidence. In written submissions, the Department stated the issue in the case as "whether the tribunal was correct to decide that having considered all the circumstances pertaining to this case that [the respondent's] interest in her former marital home is of little or no value". With respect, the correctness of the tribunal's decision is not the issue. The lawfulness of the tribunal's decision is the issue. A more accurate formulation would be whether the tribunal was entitled to decide that, having considered all the circumstances pertaining to this case, the respondent's interest in her former marital home is of little or no value.

 

31. Where a challenge to the decision of an appeal tribunal is brought on grounds relating to its treatment of the evidence, the test is not whether I or someone else would have reached a different conclusion on the evidence. Rather the test is whether there was insufficient evidence to ground the conclusion of the appeal tribunal or whether the appeal tribunal has made a decision on all the evidence which no reasonable appeal tribunal could reach.

 

32. The tribunal in the present case had a valuation placed before it by the Department, which relied upon the expertise of the LSP valuer. The Department submits that the tribunal should have accepted this evidence in the absence of alternative evidence of valuation.

 

33. In the case of GB v Department for Social Development [2015] NI Com 62, i n relation to evidence of valuation, I followed C23/02-03(IS). There Chief Commissioner Martin QC, in a case concerning valuation of land owned in a tenancy in common, had in turn endorsed the decision of Great Britain Deputy Commissioner Mark. Chief Commissioner Martin said that he "doubted whether any Tribunal could come to a proper decision without taking into account those matters set out by Mr Deputy Commissioner Mark in Great Britain decision R(JSA)1/02".

 

34. In R(JSA)1/02, Deputy Commissioner Mark was considering a case where a claimant had a half-interest in a property and, allowing the appeal, had said that:

 

1. "it is not a sufficient explanation of a decision for a tribunal to accept the opinion of a valuer as to the value of an interest in property, even where the valuer is shown to be an expert, without some reasons being given for adopting the value put forward (para.10);

 

2. there is no rule of law that, where a wife and children are still living in the former matrimonial home, the value of a claimant's share in that home must be regarded as nil (para.11);

 

3. the value of the claimant's share must be considered on the evidence in each case but, where a property is of modest value and none of that value can be realised by the claimant or any person acquiring his interest for a lengthy or unascertainable period, it is unlikely that anybody would be prepared to pay very much for that interest and it may have little or no value (para.11);

 

4. proper valuation evidence should include:

 

(i) grounds on which the valuer is held out as having appropriate expert knowledge, including, where the value of a share in property is at issue, the valuer's experience relating to such shares and their sale;

 

(ii) details of the property, including its location, size and condition, sufficient to provide a basis for the valuation;

 

(iii) in the case of leasehold property, details of the length of the lease and any special terms in it;

 

(iv) where the value of a share in property is in issue, an explanation of the factors considered relevant to the valuation and how they affect it;

 

(v) evidence of actual sales of comparable properties or interests, or an explanation of why these are not available,

 

but where this is not possible and the valuer has had to proceed on the basis of assumptions because of the lack of any relevant information, the report should state what is missing and the assumptions upon which the report is based (paras. 13 and 14); ...".

 

35. Deputy Commissioner Mark made the observation at paragraph 14 of his decision that "I appreciate that, in cases of this kind, this will on occasions be a counsel of perfection which cannot be realised". The guidance of Deputy Commissioner Mark appears in a reported decision and has been followed in this jurisdiction by Chief Commissioner Martin and by me. Nevertheless, I think that it is a realistic qualification of his decision to acknowledge that the guidance may amount to a counsel of perfection on occasions. It should not be viewed as a binding requirement on tribunals.  

 

36. In this case, the Department's valuer has provided two reports dated 3 February 2014 and 12 September 2014 respectively. The more comprehensive is the latter report. It sets out the valuer's qualification and details of the property. It sets out in particular the fact that the property is occupied by the respondent's 71-year-old former spouse. It estimates a life expectancy for the respondent's husband, based on NISRA statistics, of 78. It then adjusts the valuation of the property to take account of the occupation by the respondent's husband. However, the methodology is not explained, and Mr Gough candidly admitted that he did not himself understand the abbreviations that appear or the mathematical basis of the adjustment. His submission was in effect that the expert should be trusted. The report further sets out a number of comparable properties which sold in the same geographical area between 2008 and 2013. Mr Gough submitted that we should expect the tribunal to rely on the expert's valuation unless there were good reasons not to do so.

 

37. The report sets out evidence of sales of houses in the area. However, the guidance given by Deputy Commissioner Mark suggested that evidence of actual sales of comparable properties or interests should be made available, or an explanation of why these are not available. In GB v DSD, I observed that Chief Commissioner Martin had doubted "whether any Tribunal could come to a proper decision without ... evidence of relevant comparators". I said that this was the "elephant in the room" in cases such as the present one. In this context, I consider that it is important to note that regulation 19 of the PC Regulations requires that capital shall be calculated at "its current market or surrender value". The market value is ultimately the amount that a third party is prepared to pay for an item.

 

38. The question of whether there was any sort of market for half-interests in property was discussed in GB v DSD but none of the representatives was aware of such a market. Similarly, Mr Gough in the present case was unable to point to any such market. The LSP valuer has not referred to evidence of actual sales of comparable properties or interests.

 

39. As I have understood it, the crux of the tribunal's reasoning, referring to the LPS report, was that "a purely mathematical approach as adopted by the Department is not the correct approach to interests such as those held by the appellant". The LQM stated that "in my view it is unrealistic in this case as it does not fully take into account the difficulties of realising that value". The tribunal finds on that basis that the value of the respondent's interest is basically nominal and not of any realistic value.

 

40. The Department has advanced a hypothetical valuation of the respondent's interest in the property, based on evidence of the husband's life expectancy and an estimated reduction in value for the duration of his possible occupation. The valuation makes a presumption that the husband's successors in title will not impede a sale of the respondent's interest at that date. There is presumably some accepted science and actuarial data behind the estimate, albeit unexplained.

 

41. However, what I had described as the "elephant in the room" is the lack of evidence of a real world market in half interests in property owned by tenants in common. The comparators advanced by LPS were of the market value of entire houses. However, it is accepted by the Department that the capital to be calculated is not half the value of the house, but the value of the respondent's half-interest in the house. Therefore, no evidence of the relevant comparator has been advanced by the Department. This is because, so far as I am aware, there is no market for the type of interest in property which the respondent possesses. Where there is no market, it follows that the current market value of the respondent's interest is likely to be, as the tribunal has found, nominal.

 

42. The Department submits that the valuation advanced by LPS contained adjustments to allow for the particular nature of the respondent's interest in the property. I accept this. However, I do not consider that the tribunal was bound as a matter of law to accept the LPS valuation. In particular, the LPS valuation did not and could not point to evidence of sales of comparable interests. The tribunal was entitled to find that the LPS valuation did not reflect the market value of the respondent's share in the former matrimonial home. It was entirely unrelated to any evidence of what someone would be prepared to pay for the interest in question.

 

43. I do not consider that the Department has established that the tribunal has erred in point of law and I disallow the appeal.

 

 

(signed)

O Stockman

 

Commissioner

 

 

 

9 November 2016