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[2006] UKSSCSC CPC_1820_2005 (28 July 2006)

CPC/1820/2005

CPC/2574/2005

DECISION OF THE SOCIAL SECURITY COMMISSIONER

1. My decision in CPC/1820/2005 is that the decision of the tribunal held on 10 January 2005 is erroneous in law. Accordingly I allow the appeal on behalf of the Secretary of State, set the decision of the tribunal aside and remit the case for rehearing by a differently constituted tribunal.
2. My decision in CPC/2574/2005 is that the decision of the tribunal held on 2 February 2005 is also erroneous in law. Accordingly I allow the appeal on behalf of the Secretary of State, set the decision of the tribunal aside and remit the case for rehearing by a differently constituted tribunal.
3. It would be sensible, given the similarity between the two cases, if they were both to be reheard by the same new tribunal.
4. These appeals raise the question of what elements of service charges payable in respect of leasehold accommodation are ineligible housing costs which cannot be met by state pension credit. In each case the claimant is a woman, in her mid-eighties, who lives in a development of self-contained sheltered flats constructed for the active retired: each development has a resident scheme manager. Although the claimants live in different developments, the landlord and managing agent ("Touchstone") is the same for each development. Touchstone is a registered charitable housing association which owns and runs a considerable number of similar developments, mostly in the Greater Midlands area.
5. In each case, during the financial year 2003/4, the claimant was in receipt of state pension credit, including housing costs: those housing costs included (i) the maintenance and service charges levied by Touchstone, including those service charges attributable to the scheme manager (other than those met by the Supporting People programme funded by the local authority) and (ii) (as I understand the position) all the general administration or management charges. In the financial year 2004/5, however, the Department disallowed certain service charges namely:

(a) the charges attributable to the emergency alarm service provided on each development;

(b) the balance of the charges attributable to the scheme manager (namely, those not met by the Supporting People programme); and

(c) a proportion of the general administration or management charges.

In each case the claimant (with the assistance of Touchstone) appealed to a tribunal.

6. In each case the tribunal substantially allowed the claimant's appeal and held:

(a) that the charges attributable to the emergency alarm service were ineligible service charges;

(b) that 71% of the charges attributable to the scheme manager were eligible service charges and 29% of those charges (being those met by the Supporting People programme) were ineligible; and

(c) that the entirety of the general administration or management charges were eligible service charges.

The Secretary of State appealed both tribunal decisions, with the leave of a chairman. I understand there are a considerable number of other similar appeals awaiting determination by tribunals.

7. Both the Secretary of State and the claimants requested an oral hearing, which request was granted by a Commissioner. At the oral hearing the Secretary of State was represented by Mr Maurici of Counsel and the claimants by Miss Findlay of Counsel, instructed by Touchstone on their behalf. I am grateful to Mr Maurici and Miss Findlay for their submissions, both written and oral. I should also record the efforts that Touchstone has clearly made in endeavouring to ensure that residents in their developments receive all the benefits to which they may be entitled.
8. Before I turn to the central issue in these cases, there are two preliminary matters. First, it is not in dispute that the charges attributable to the emergency alarm service are ineligible as service charges for the purposes of state pension credit. This is clearly correct since charges in respect of the provision of an emergency alarm system are expressly made ineligible by paragraph 1(c) of Schedule 1 to the Housing Benefit (General) Regulations 1987 ("the 1987 Regulations"). Secondly, although Miss Findlay did faintly seek to argue to the contrary in her written submission, it was not in dispute before me that both tribunals erred in law in not apportioning the general administration or management charges as eligible or ineligible rateably in proportion to the eligibility or ineligibility of the other service charges. This method of apportionment was that adopted by the Commissioner in CPC/968/2005, not following an alternative method of apportionment set out in paragraph 28 of CIS/2901/2004. I respectfully endorse what the Commissioner stated in CPC/968/2005 (where the tribunal, in the decision there under appeal, also erroneously allowed the whole of the general administration or management charges) and find that the two tribunals in the present case failed to make the fair attribution of the administration or management charges required by paragraph 13(2)(b) of Schedule II of the State Pension Credit Regulations 2002 ("the 2002 Regulations"), which attribution should have been made as indicated above.
9. The central issue in these cases is what, if any, part of the charges attributable to the scheme manager are eligible to be met as housing costs. As I have mentioned above the decision maker decided that none of these charges were eligible: each tribunal found that 71% of the charges in dispute (being the balance not met by the Supporting People programme) were eligible. Before I consider the parties' respective contentions, I briefly summarise the relevant legislative provisions.
10. Regulation 6(6)(c) of the 2002 Regulations provides that a person qualifying for state pension credit shall be entitled to an amount in respect of housing costs calculated in accordance with Schedule II to those Regulations. Paragraph 1 of Schedule II of the 2002 Regulations provides:

" (1) Subject to the following provisions of this Schedule, the housing costs applicable to a claimant in accordance with regulation 6(6)(c) are those costs –

(a) which the claimant or if he has a partner, his partner is, … liable to meet in respect of the dwelling occupied as the home which he or his partner is treated as occupying; and

(b) which qualify under paragraphs 11 to 13."

Paragraph 13 of Schedule II, so far as is relevant provides:

" 13. (1) Subject to the deductions specified in sub-paragraph (2) … there shall be met under this paragraph the amounts, calculated on a weekly basis, in respect of the following housing costs –

…

(b) service charges

…

(2) … the deductions to be made from the weekly amounts to be met under this paragraph are –

…

(b) where the costs are inclusive of ineligible service charges within the meaning paragraph 1 of Schedule 1 to the Housing Benefit (General) Regulations 1987 (ineligible service charges) the amounts attributable to those ineligible service charges or where that amount is not separated from or separately identified within the housing costs to be met under this paragraph, such part of the payments made in respect of those housing costs which are fairly attributable to the provision of those ineligible services having regard to the costs of comparable services.

…"

With effect from the beginning of April 2003 paragraph 1 of Schedule 1 to the 1987 Regulations provides (so far as is relevant for these appeals):-

" 1. The following service charges shall not be eligible to be met by housing benefit –

…

(f) charges in respect of general counselling or of any other support services whoever provides those services

(g) charges in respect of any services not specified in sub-paragraphs (a) to (f) which are not connected with the provision of adequate accommodation."

11. Prior to April 2003 paragraph 1(f) of Schedule 1 contained an exception in respect of general counselling or other support services (i) which were provided to a claimant in supported accommodation by the claimant's landlord or by someone on behalf of the claimant's landlord and (ii) which fell within paragraph 2 of Schedule 1B to the 1987 Regulations. The pre-April 2003 form of paragraph 1(f) (taken together with, the now repealed, Schedule 1B to the 1987 Regulations) meant that qualifying counselling and support services were met by minimum income guarantee or income support. Post March 2003 qualifying counselling and support services were met by local authorities under the Supporting People programme, established by virtue of section 93 of the Local Government Act 2000.
12. For the financial year 2003/4 (that is to say the year in which the Supporting People programme commenced) in the case of each claimant all the charges attributable to the scheme manager, other than those met by the Supporting People programme, were treated as allowable housing costs. However, in the financial year 2004/5 the Department (or the Pension Service) had a change of heart, following a review of the way it treated service charges, and decided that it could not pay for any charges attributable to the scheme manager and could only allow a percentage of the charges attributable to general administration or management – see the letters dated 5 and 18 October 2004 to be found at pages 7-9 of CPC/2574/2005. The disallowance was on the basis that the claimant had not shown that the charges in dispute were connected with "the provision of adequate accommodation" within paragraph 1(g) of Schedule 1 to the 1987 Regulations – see the letter dated 25 November 2004 at pages 57-8 of CPC/1820/2005. This change meant that under the original decisions the claimants in the present two cases were left to pay an element of their service charges, which had been previously met by benefit as housing costs, out of their own personal funds: by my calculation in CPC/1820/2005 the shortfall was £21.14 per month and in CPC/2574/2005 £20.73 per month.
13. Mr Maurici submitted to me that the amendment made in April 2003 to paragraph 1(f) in Schedule 1 to the Housing Benefit Regulations 1987 had given added importance to paragraph 1(g) of that Schedule: as I have noted above paragraph 1(g) renders ineligible charges which are "not connected with the provision of adequate accommodation". In my judgment this is not the correct analysis. The amendment, by the deletion of an exception in paragraph 1(f), cannot change the meaning or the force of paragraph 1(g). Rather, I suspect that in the pre-April 2003 world the Department either accepted that the entirety of the charges attributable to the scheme manager fell within the then exception to paragraph 1(f) or did not dissect those charges between (i) those attributable to eligible support and counselling, (ii) those attributable to the provision of adequate accommodation and (iii) those which fell outwith either category (i) or (ii) and which were hence ineligible. For the financial year 2003/4 the Department continued its previous practice save with regard to charges met by the Supporting People programme. In the financial year 2004/5 it appears to have woken up to the fact that if only a proportion of the charges attributable to a scheme manager were allowable under the Supporting People programme then an analysis of the remainder of those charges was requisite. In short, it would appear that the point now taken by the Department was potentially always there, but had not previously been taken.
14. The question I have to decide is whether the tribunals were correct in law in finding that 71% of the service charges attributable to the scheme manager were eligible housing costs. For this purpose it was necessary for it to be shown that the service charges in dispute were connected with the provision of adequate accommodation so that they were not excluded by paragraph 1(g) of Schedule 1 to the 1987 Regulations. Mr Maurici, on behalf of the Secretary of State, argued that the claimants had not adduced sufficient or adequate evidence to establish the eligibility of the service charges in dispute as housing costs. Miss Findlay, on behalf of the claimants, submitted that there was sufficient evidence for the tribunals to come to the conclusions that they reached and that the Department's failure to challenge that evidence or to request further details could not now be remedied by way of an appeal. She also made submissions on the burden of proof and on the application of the decision of the House of Lords in Kerr v. The Department for Social Development [2004] 1WLR 1372.
15. In CPC/1820/2005 the evidence before the tribunal with regard to the costs attributable to the scheme manager was the following:

(a) A statement in a facsimile sent to the Department on 30 September 2004 (to be found at page 26) to the effect that support was provided on Touchstone's schemes by the scheme manager and that in order to assess how much of his costs was attributable to support and non-support activities Touchstone had carried out a time/activity exercise and had identified that 29% of the scheme manager's time was attributable to support.

(b) A document entitled "Supporting People: What's it all about?", included with the facsimile just mentioned, which was prepared by Touchstone in November 2002 and which is to be found at pages 27 to 31. It appears from internal references that this document was prepared for the use of the scheme managers themselves. At page 30 it was stated:

'Some of you may recall that earlier this year you participated in a two-week monitoring exercise, recording what you did and how long you spent on various activities. This information was invaluable, and provided the basis for the information we eventually gave to the Supporting People teams up and down the country. We analysed all the results you gave us, and worked out that on average our scheme managers spend 29% of their time on general counselling and support services'.

(c) A facsimile from Touchstone to the Department dated 21 October 2004 in which the writer stated:

'There appears to be some confusion over the eligibility of the Scheme Manager's salary. The duties of a Scheme Manager are that of a Warden, the name is one of convenience and is used to better describe their role. The perceived role of a Warden is that they offer care or good neighbour service. The name Scheme Manager reflects the substantial responsibility that they have for managing the accommodation at a sheltered scheme. We have carried out a study on the role of our scheme managers and had identified that 29% of their time is in fact attributable to care and support, the remaining 71% of their time being attributable to the provision of accommodation. The guidance offered by the Department for Work and Pensions confirms that 'warden service' is an eligible service charge item. I would refer you to [paragraph] 4.177 [of the Housing Benefit Guidance Manual]: "Charges for the following services are eligible:

Wardens and caretakers – allow the proportion of the charge for the time that they are providing eligible accommodation related services, other than those eligible under the transitional scheme." '

(d) A letter dated 12 November 2004 from Touchstone to the Department which set out Touchstone's understanding of what was eligible for the Supporting People programme and then stated:

'In calculating the amount of time the Scheme Manager spends on counselling and support we carried out a time study of their activities and identified that 29% of their time was spent on this and we have included 29% of their direct costs [under the Supporting People programme].'

The writer then went on to refer again to the passage in the Guidance Manual.

(e) A submission (to be found at pages 58A to 58J), together with supporting annexes, which the record of proceedings shows was handed in to the tribunal on the day of the hearing. Paragraph 3.8 of that submission referred to the monitoring exercise conducted by Touchstone and that it had identified that 29% of the time of scheme managers was spent on duties that were considered general counselling and support. Paragraph 3.9 set out what Touchstone considered to constitute general counselling and support. In paragraph 3.10 Touchstone listed under ten bullet points other duties of the scheme manager which arguably related to the provision of adequate accommodation. In paragraph 3.15 Touchstone submitted that only 29% of the direct costs of providing the scheme manager services should be disallowed for the purposes of pension credit. In paragraph 4.2 Touchstone submitted that 29% of the scheme manager costs were ineligible for pension credit purposes but that the remaining 71% of the costs were eligible and were in pursuance of providing adequate accommodation.

16. In CPC/2574/2005 the relevant evidence before the tribunal consisted of:

(a) A copy of the facsimile dated 21 October 2004 (referred to in paragraph 15(c) above).

(b) A copy of the letter dated 12 November 2004 (referred to in paragraph 15(d) above).

(c) A submission (also handed in to the tribunal on the day of the hearing) in virtually identical terms to the submission handed in in CPC/1820/2005.

(d) A copy of the tribunal's statement of reasons in CPC/1820/2005.

17. At the hearing before me there was handed in a copy of the time/activity survey conducted by Touchstone for the purposes of the Supporting People programme and a copy of a job description for a scheme manager. Neither of these documents was before either tribunal.
18. In my judgment Mr Maurici's submission that there was no sufficient or adequate evidence before either tribunal is correct. All the pieces of evidence produced to each tribunal (with one exception) were principally directed towards the proposition that 29% of the scheme manager's time was spent on general counselling and support within the Supporting People programme. (The documentation produced at the hearing before me confirmed that this 29% figure was an average figure calculated by reference to a survey of scheme managers' time at 12 different Touchstone developments: neither of the two developments with which I am concerned formed part of the sample. The individual figures varied from 18% to 53% of each scheme manager's time being spent on general counselling and support. I was informed that the average figure of 29% had been agreed with 10 different local authorities.) Nowhere in the papers (with the one exception) was there any reference to what the scheme managers actually did in connection with the provision of adequate accommodation. Touchstone in its submissions to the Department and the tribunal seems to have assumed that once it had established what percentage of a scheme manager's time was spent on general counselling and support (and hence met by the Supporting People programme) the remainder of the scheme manager's costs would automatically fall to be met by pension credit. This assumption may have been induced by the fact that the scheme manager's costs had, by one means or another, previously been allowed in full. In my judgment it was not sufficient simply to submit that since 29% of the scheme manager's costs were met by the Supporting People programme, therefore the remainder of his costs were concerned with the provision of adequate accommodation. Nowhere in any of the material before either tribunal (with the one exception) was there any detail of what the scheme manager did other than in relation to general counselling and support, and nowhere was there any indication of what proportion of his time a scheme manager spent on activities said to relate to the provision of adequate accommodation.
19. The one exception is the list of activities or duties contained in paragraph 3.10 of the submission to each tribunal. As I have stated above that list contained items which were arguably related to the provision of adequate accommodation. However there are three difficulties with this evidence. First, neither tribunal expressly referred to it nor based its decision upon it: each tribunal essentially decided that because 29% of the scheme manager's costs was met by the Supporting People programme and was ineligible, therefore the remaining 71% automatically became an eligible housing cost. Secondly, paragraph 3.10 of the submission did not indicate how much of a scheme manager's time was spent on the activities there mentioned or whether the scheme manager had other duties which did not fall within either the Supporting People programme or the activities mentioned in paragraph 3.10. Thirdly, the submission (according to both records of proceedings) was handed in on the day of the hearing; if, despite the lack of reference to paragraph 3.10, either tribunal was placing reliance on the contents of that paragraph, it should, in my judgment, have adjourned to allow the Department to meet the new evidence; in each bundle before the tribunal paragraph 3.10 was the first occasion on which Touchstone had actually identified activities of the scheme manager other than those concerned with general counselling and support.
20. Miss Findlay submitted to me that the decision of the House of Lords in Kerr meant that in effect the burden shifted to the Department to show that more than 29% of the charges were ineligible to be met at housing costs. I cannot accept this submission. Kerr was concerned with evidence which was peculiarly within the knowledge of the Department, rather than that of the claimant: it was further concerned with the point that the claimant in question was entitled to benefit, unless the Department showed that he fell within an exception. Neither point arises in the present case. I respectfully endorse what the Commissioner stated in paragraphs 29 and 30 of CIS/2901/04 as to the relevance of Kerr to such cases as the present. It is clear from the decision of the Court of Appeal in R v. Stoke-on-Trent City Council ex p. Highgate Projects [1997] 29 HLR 271 that the burden of proving that services charges are eligible as housing costs falls on the claimant: none of the information relating to those housing costs is within the Department's direct knowledge. Nor can I accept Miss Findlay's argument that sub-paragraph 13(2)(b) of Schedule II to the 2002 Regulations shifts the burden of showing eligibility to the Department: that sub-paragraph (set out in paragraph 10 above) is concerned with the quantification of ineligible housing costs and not with the prior question of what items are eligible.
21. I therefore must set aside the decision of each tribunal on the footing that there was no adequate or sufficient evidence to enable them to come to the conclusions they reached. I remit the cases for rehearing by a differently constituted tribunal.
22. Before I leave these appeals, however, I should make two further observations with regard to the nature of the evidence that is requisite to establish eligibility. First, in my judgment the eligibility or ineligibility of service charges as housing costs must be considered in relation to each service charge unit by reference to which the landlord calculates the service charge for each resident: that is to say, in the present cases, by reference to each separate development. An average figure taken by reference to a sample of developments, or indeed all developments, will not suffice: developments may vary in size, structure, age and condition and in the requirements of the residents (Touchstone's own survey indicated the variations in time spent by scheme managers on general counselling and support). Further, if all the other, admittedly eligible, maintenance or service charges are in fact calculated development by development (as the evidence in these cases showed), it would be anomalous to use a different basis with regard to the scheme manager's costs.
23. Secondly, in paragraph 28 of CIS/2901/04 the Commissioner stated that:

"… a sufficiently accurate assessment of how much of [service charge] expenditure is attributable to accommodation related services cannot be made by simply looking at job descriptions. It is necessary to establish the number of hours per week spent by the employees on providing those services. The part of the salaries bill which is attributable to the provision of accommodation related services can then be calculated. The staff administration costs such as staff advertising, employers liability insurance and personnel management attributable to accommodation related services should be calculated by applying to them the ratio of hours spent on accommodation services to hours spent on support services. That will be, I have little doubt, a very time consuming process for the management."

Mr Maurici endorsed this approach. In paragraph 9 of CPC/968/2005 the Commissioner referred to the passage I have cited, in particular to the "very time consuming process", and stated that a somewhat broad approach should be called for: he remarked that it could well be that a management company might not be able, or willing, to provide the necessary calculations. I accept that the process described by the Commissioner in paragraph 28 of CIS/2901/04 may be described as the gold standard for assessing what proportion of charges are eligible or ineligible in cases such as these. Such evidence is clearly sufficient, but not in my judgment always necessary. In some cases it might be impossible for such evidence to be provided. For example, there may be a sheltered housing development with only one or two residents in receipt of benefit, out of a total of say 30 or 40 residents. The landlord may be a commercial concern. It may comply with all its obligations with regard to the production of accounts and documentation under the Landlord and Tenant Act 1985, but I cannot see that there is anything in that legislation which would compel the landlord to carry out such a survey as has been suggested: indeed the landlord might well reasonably take the view that the cost of the conduct of such a survey for the benefit of one or two residents would bear unfairly on the other residents who paid their own service charges. Further, in the present cases the claimants were fortunate to have the support of their landlord. In other cases the claimant, who often typically will be elderly and with no great knowledge of either the benefit system or of service charges, might well not have such support and would be effectively shut out from part of his or her housing costs if the gold standard had to be applied in every case; it cannot be reasonable that access to an element of benefit should, in every case, depend on evidence which is outwith the claimant's own knowledge and the production of which he may not be able to compel. I concur with the remark of the Commissioner in paragraph 9 of CPC/968/2005 that a "broad approach" is called for: for example, a decision-maker or tribunal supplied with the terms of the lease relating to services and service charges, a breakdown of the service charges, details of what service charges (if any) are met by the Supporting People programme, and a statement from the scheme manager as to how his working time is usually divided up should normally be able to make a reasoned estimate of how much of the service charges in dispute are eligible or ineligible. Each case will, however, inevitably turn on its own facts and evidential requirements will vary.

24. My decisions are as given in paragraphs 1 and 2 above.

(Signed on the Original) A Lloyd-Davies

Commissioner

28 July 2006