Northern Ireland - Social Security and Child Support Commissioners' Decisions

MMcA-v-Department for Communities (IS) [2017] NICom 53

 

Decision No:  C3/16-17(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 8 October 2015

 

 

DECISION OF THE SOCIAL SECURITY COMMISSIONER

 

 

1.     The decision of the appeal tribunal dated 8 October 2015 is in error of law.  The error of law identified will be explained in more detail below. Pursuant to the powers conferred on me by Article 15(8) of the Social Security (Northern Ireland) Order 1998, I set aside the decision appealed against.

 

2.     I would ask the Legally Qualified Panel Member (LQPM) of the appeal tribunal to note that it has been accepted by the Department that the appeal submission did not address an important decision of the Upper Tribunal on the issue of beneficial ownership of a specific type of bank savings account, as the decision of the Upper Tribunal had not been promulgated when the appeal submission had been prepared.  Equally, the decision of the Upper Tribunal had not been promulgated at the date on which the appeal tribunal made its decision.  Accordingly, the appeal tribunal is not at fault for failing to consider judicial authority which was not available to it.  Nonetheless I have accepted that had the appeal tribunal been aware that the decision of the Upper Tribunal was pending (the decision was highlighted by the Upper Tribunal as addressing a key issue in advance of its promulgation and it was promulgated within a month of the appeal tribunal decision), then it is likely that it would have awaited the outcome of that decision and that its approach to the issues arising in the appeal would have been different.

 

3.     For further reasons set out below, I am unable to exercise the power conferred on me by Article 15(8)(a) of the Social Security (Northern Ireland) Order 1998 to give the decision which the appeal tribunal should have given.  This is because there is detailed evidence relevant to the issues arising in the appeal to which I have not had access.  There may be further findings of fact which require to be made and I do not consider it expedient to make such findings, at this stage of the proceedings. Accordingly, I refer the case to a differently constituted appeal tribunal for re-determination.

 

4.     In referring the case to a differently constituted appeal tribunal for re-determination, I direct that the appeal tribunal takes into account the guidance set out below.

 

5.     It is imperative that the appellant notes that while the decision of the appeal tribunal has been set aside, the issue of her entitlement to Income Support (IS), for a particular period, remains to be determined by another appeal tribunal. In accordance with the guidance set out below, the newly constituted appeal tribunal will be undertaking its own determination of the legal and factual issues which arise in the appeal. 

 

         Background

 

6.     On 14 May 2015 a decision maker of the Department reconsidered and revised an earlier decision of the Department itself dated 16 April 2015. The effect of the revision was that the appellant was not entitled to IS from 5 April 2013 to 13 June 2013 and from 28 June 2013 to 15 August 2013.  Tariff income was applied in respect of other periods.

 

7.     An appeal against the decision dated 16 April 2015 had been received in the Department on 11 May 2015.  As the revision decision of 14 May 2015 was not more advantageous to the appellant than the decision of 16 April 2015, the appeal continued against that latter decision, as revised.

 

8.     The appeal tribunal hearing took place on 8 October 2015.  The appeal proceeded by way of a ‘paper’ hearing. On 17 August 2015 the appellant had completed and returned Form ‘Reg2(i)d’ to the Appeals Service (TAS) where it was received on 18 August 2015.  The appellant had indicated that she was content for the appeal to proceed without an oral hearing.  The appeal tribunal disallowed the appeal and confirmed the decision dated 14 May 2015.  

 

9.     On 15 October 2015 correspondence from the appellant dated 13 October 2015 was received in TAS.  In this correspondence the appellant made a request for the decision of the appeal tribunal to be set aside ‘… on the grounds of natural justice.’  On 11 December 2015 correspondence dated 22 November 2015 was received in TAS.  In this correspondence the appellant made an application for leave to appeal to the Social Security Commissioner.

 

10.   On 21 January 2016 the LQPM of the appeal tribunal determined that the application to have the decision of the appeal tribunal set aside should be refused.  On the same date the LQPM refused the application for leave to appeal.

 

         Proceedings before the Social Security Commissioner

 

11.   On 30 March 2016 a further application for leave to appeal was received in the Office of the Social Security Commissioners.  On 6 May 2016 observations on the application for leave to appeal were requested from Decision Making Services (DMS).  On 18 May 2016 further correspondence was received from the appellant.

 

12.   In written observations dated 19 May 2016, Mr Woods, for DMS, supported the application for leave to appeal.  Written observations were shared with the appellant on 1 June 2016.  There has been no further response from the appellant.

 

 

13.   On 9 September 2016 I granted leave to appeal.  In granting leave to appeal I gave, as a reason, that it was arguable that the appeal tribunal had failed to apply the principles in DF v SSWP ([2015]] UKUT 0611 (AAC)).  On the same date I directed that an oral hearing of the appeal would not be required.

 

         Errors of law

 

14.   A decision of an appeal tribunal may only be set aside by a Social Security Commissioner on the basis that it is in error of law.  What is an error of law?

 

15.   In R(I)2/06 and CSDLA/500/2007, Tribunals of Commissioners in Great Britain have referred to the judgment of the Court of Appeal for England and Wales in R(Iran) v Secretary of State for the Home Department ([2005] EWCA Civ 982), outlining examples of commonly encountered errors of law in terms that can apply equally to appellate legal tribunals. As set out at paragraph 30 of R(I)2/06 these are:

 

“(i)       making perverse or irrational findings on a matter or matters that were material to the outcome (‘material matters’);

(ii)        failing to give reasons or any adequate reasons for findings on material matters;

(iii)       failing to take into account and/or resolve conflicts of fact or opinion on material matters;

(iv)       giving weight to immaterial matters;

(v)        making a material misdirection of law on any material matter;

(vi)       committing or permitting a procedural or other irregularity capable of making a material difference to the outcome or the fairness of proceedings; …

Each of these grounds for detecting any error of law contains the word ‘material’ (or ‘immaterial’).  Errors of law of which it can be said that they would have made no difference to the outcome do not matter.”

 

         Analysis

 

16.   In DF v Secretary of State ([2015] UKUT 0611 (AAC)) (‘DF’), Upper Tribunal Judge Mitchell gave guidance to decision-making authorities on the proper approach when a submission is made that the beneficial ownership in an Individual Savings Account (ISA) lies elsewhere than in the person named as the owner of the ISA.  Judge Mitchell began by setting out the legislative context, in paragraphs 9 to 16, as follows:

 

‘The Individual Savings Account Regulations 1998 (“ISA Regulations”)

 

9. Regulation 3 of the ISA Regulations (entitled “Introductory”) describes what they do:

“These Regulations provide for the setting up of plans in the form of an account, by account managers approved by the Board, under which individuals may make certain investments, for the conditions under which they may invest and under which those accounts are to operate, for relief from tax in respect of account investments and generally for the administration of tax in relation to such accounts.”

 

10. So regulation 3 identifies four purposes, none of which necessarily require a third party’s beneficial interests in the sums deposited in an ISA to be extinguished. The purposes are:

 

(a) the setting up by approved account managers of investment plans in the form of accounts that qualify for tax relief;

 

(b) imposing conditions on making investments in such accounts;

 

(c) imposing conditions under which the conditions are to operate;

 

(d) dealing with the administration of tax in relation to such accounts.

 

11. Regulation 4 is entitled “General conditions for accounts and subscriptions to accounts”. Paragraph (1) defines what an account is.  This is important because an investment plan that is not an account as defined does not attract ISA tax reliefs.  The definition requires an account to fulfil the “conditions and requirements” in regulations 4(1A) and (5) to (8).

 

12. Regulation 4(5) provides that “an account must at all times be managed in accordance with these Regulations by an account manager and under terms agreed in a recorded form between the account manager and the account investor”.  The account terms are controlled by the regulations.  Regulation 4(6) requires the terms to “secure” certain matters including:

 

(a) “that the account investments shall be in the beneficial ownership of (i)…the account investor”.  This requirement has been in the ISA Regulations since they were first made.  Separate provision is made for junior ISAs which I need not set out; and

 

(b) “that the account manager shall notify the account investor if by reason of any failure to satisfy the provisions of these Regulations an account is or will become no longer exempt from tax by virtue of regulation 22(1)”.

 

13. Regulation 4A is entitled “Repair of certain incompatible account and excess subscriptions – accounts other than junior ISA account”.  It identifies certain “invalid” accounts as “eligible for repair”.  Once repaired, tax reliefs are maintained although the account investor remains liable to account to H.M.R.C. for “any relief from tax given for the period up to the date of discovery” (paragraph (2)(e)).

 

14. Regulation 12 is entitled “Conditions for application to open an account that is not a junior ISA account”. Paragraph (1) requires the ISA-applicant to give the account manager a statement that fulfils certain conditions, including a declaration that “all cash subscriptions made, and to be made, to the account are the applicant’s cash” (paragraph (3)(c)).  The account manager must make a record of the declaration and notify the applicant of its contents within 5 business days.  By regulation 29, the account manager is required to keep this record.

 

15. Linked to the declaration requirement, regulation 12(6) prohibits an account manager from accepting as an account investor “any individual if he has reason to believe that (a) he is not or might not be a qualifying individual, or (b) he has given untrue information in his application”.

 

16. Regulation 22 provides that, generally, income tax is not chargeable in respect of interest accruing on ISA deposits and “relief in respect of tax shall be given in the manner and to the extent provided by these Regulations”. Regulation 28(1) deals with the case where any relief or exemption from tax is found “not to be due”.  In such circumstances, H.M.R.C. have the power to make an assessment of the unpaid tax.’

 

17.   I would note, at this stage, that the Individual Savings Account Regulations 1998 apply in Northern Ireland.

 

18.   In a very useful paragraph 17, Judge Mitchell sets out the danger implicit in an argument that the beneficial ownership in the sums deposited in an ISA belongs to a third party:

 

‘17. I shall step back for a moment to note that, given the legislative context, it is perhaps surprising that any claimant would argue a third party has a beneficial interest in the sums deposited in an ISA.  This argument:

 

(a) implies the terms on which the ISA was agreed were either flawed or not adhered to by the claimant.  This is because the terms must secure that no one else has a beneficial interest in the sums (reg. 4(6));

 

(b) implies that the claimant made an incorrect declaration upon opening the ISA.  This is because the applicant must declare that the cash deposited is his/her cash (reg. 12(3)(c));

 

(c) involves an acceptance that any tax relief was wrongly applied.  The argument that someone else has a beneficial interest in the ‘ISA’ involves accepting that it is not an ISA;

 

(d) generates the right for H.M.R.C. to recover the tax avoided (reg. 28). There may also be tax penalties to pay;

 

(e) risks criminal proceedings for the offence of being “knowingly concerned in the fraudulent evasion of income tax by that or any other person” (section 106A Taxes Management Act 1970).’

 

19.   Following a detailed analysis, Judge Mitchell concludes that the ‘…law neither extinguishes the beneficial interests of third parties in sums deposited in ISA accounts nor imposes a general prohibition on a claimant who is an ISA account-holder from arguing that someone else has a beneficial interest.’

 

20.   Judge Mitchell then goes on to provide guidance to decision-making authorities, including appeal tribunals, on the proper approach when an argument is advanced that the beneficial ownership in an ISA lies with a third party and not the named owner.  The guidance is set out in paragraphs 57 to 60, as follows:

 

‘57. It might assist if I give guidance about how to deal with an argument that the beneficial interest in an ISA lies elsewhere.  I am not sure how frequently this arises but I note there are currently three cases pending before the Upper Tribunal in which it is an issue.

 

58. If a claimant ISA account-holder argues the beneficial interest in the ISA lies elsewhere, certain evidence relevant to that issue can only be supplied by the claimant.  Accordingly, the claimant is expected to supply it (once asked) so that, if s/he does not, a decision maker or Tribunal is entitled to draw an adverse factual inference (Kerr v Department for Social Development [2004] UKHL 23; [2004] 1 WLR 1372).

 

59. Relevant evidence will include the original ISA agreement (which had to include a ‘no beneficial interests’ term) and the declaration that all the cash deposited in the ISA belonged to the claimant. I would suggest that the DWP seek this evidence as a matter of course where a claimant argues the beneficial interest in ISA deposits lies elsewhere.  These documents should have been retained by the ISA account manager given the record-keeping obligations under the ISA Regulations 1998.

 

60. If that evidence contradicts the claims as to beneficial ownership being advanced, findings of fact will need to be made to resolve the dispute as to beneficial ownership. The claimant may well have an evidential mountain to climb.’

 

21.   I agree with and accept the analysis undertaken by Judge Mitchell in DF which, in my view, properly reflects the law in Northern Ireland. 

 

22.   In his helpful and constructive written observations on the application for leave to appeal, Mr Woods has provided a wholly accurate summary of the decision in DF and has made the following submissions:

 

‘The tribunal considered all of the evidence given by (the appellant) in making their decision.  In the Tribunal’s reasons for the decision the Tribunal have stated:

 

“The appellant was interviewed on the 24^th October 2013 and indicated that she planned to change them to her son’s name but hadn’t got round to it.  The last four and a half years have been difficult for her due to her son (…) being very ill and her mother and father were both deceased; that she herself had not been well; and changing the account had not been something she had thought about.  She suffered from depression and also had a lot of issues concerning this.  The appellant also wrote to the department on 25^th October 2013 subsequent to her interview of the 24^th October 2013 confirming that she opened two ISA’s in February/March 2008, that they were in her name but the express intention was a trust fund for her only son (…) and that she regarded the same as a constructive trust.”

 

They also considered her other letters on 19^th and 22^nd May 2015 asking for a reconsideration:

 

“… pointing out that the accounts were set up for her son (…) education and that she had taken advice before she had set up the accounts and was informed that she could set up a constructive trust; that there had been no withdrawal from the trust.”

 

The Tribunal concluded that:

 

“It is clear that there are three different accounts all in the appellant’s name only and that the appellant should be treated as the beneficial owner of all the capital.  There is no evidence to show that the appellant set up a constructive trust – that a constructive trust was in existence.”

 

…

 

I submit that the Tribunal have considered all of the evidence available to them and decided that, as there was no evidence of (the appellant) setting up a constructive trust, it did not exist.  She opened the ISAs during the 2007/08 tax year with £7,412.80 and £3,000 respectfully.  In a letter dated 19 May 2014 (the appellant) has stated that the monies used to setup the accounts came from monies she had saved since she started working until the break-up of her marriage in 2004. I submit that, in the absence of the ISA agreement documents and any other written evidence, the Tribunal came to a logical conclusion that the ISAs were legally and beneficially owned by (the appellant).  The money that she opened the ISAs with was therefore her own; the ISA accounts are solely in her name; she had full control over the monies and there was no evidence of a trust.

 

However, in line with the above decision of the Upper Tribunal in GB, I submit that (the appellant) has not been asked the correct questions or asked to supply the required evidence to show who the beneficial owner of the money in the ISAs was or that a trust existed. I appreciate that this decision was not available to the Department when it made its decision or to the Tribunal at the date of the hearing, but still submit that (the appellant) should have been asked to provide evidence of the trust and ownership of the ISAs.  I submit that the Tribunal like the Department before it failed to ask the correct questions and for the necessary evidence.  I submit that in failing to use its inquisitorial role the Tribunal have erred in law in adopting the Department’s decision.’

 

23.   I accept this analysis and, for the reasons which have been set out by Mr Woods, agree that the decision of the appeal tribunal is in error of law.

 

         Disposal

 

24.   The decision of the appeal tribunal dated 8 October 2015 is in error of law.  Pursuant to the powers conferred on me by Article 15(8) of the Social Security (Northern Ireland) Order 1998, I set aside the decision appealed against.

 

25.   I am of the view that the directions which were issued by Judge Mitchell in DF, are, with some minor modification, apposite to the present case. Accordingly I direct that:

 

                  (1) An oral rehearing of the appellant’s appeal against the Department’s decision of 14 May 2015.  The appeal is to be relisted before a differently constituted appeal tribunal.

 

                  (2) Within one month of the date on which these directions are issued, the appellant must:

 

(a)  obtain from her ISA account manager a copy of the agreed terms on which she entered into an ISA agreement(s); and

 

(b)  obtain from her ISA account manager a copy of the declaration that she made upon opening the ISAs; and

 

(c)  send copies of those documents to the Appeals Service (TAS); and

 

(d)  if she cannot obtain those documents, send to TAS a copy of the account manager’s letter in which it explains why the documents have not been supplied to the appellant;

 

(e)  any further written submission which she wishes to put to the appeal tribunal.

 

                  (3) Within two months of the date on which these directions are issued, the Department must supply a supplementary written submission.  The supplementary submission should draw on the constructive and worthwhile written observations prepared by Mr Woods for the proceedings before the Social Security Commissioner.  A Presenting Officer should attend the further oral hearing of the appeal.

 

                  (4) The appellant is encouraged to seek representation and, as a minimum, to attend the further oral hearing.

 

 

(signed) K Mullan

 

Chief Commissioner

 

 

 

18 September 2017