Decision No:  C6/07-08(IS)

SOCIAL SECURITY ADMINISTRATION (NORTHERN IRELAND) ACT 1992

SOCIAL SECURITY (NORTHERN IRELAND) ORDER 1998

INCOME SUPPORT

Application by the claimant for leave to appeal
and appeal to a Social Security Commissioner
on a question of law from a Tribunal’s decision
dated 16 May 2006

DECISION OF THE SOCIAL SECURITY COMMISSIONER

1.	This case begins as an application by the claimant for leave to appeal against a decision dated 16 May 2006 of an appeal tribunal sitting at Lurgan.  That tribunal had disallowed the claimant’s appeal against a departmental decision dated 11 November 2005 to the effect that the claimant was not entitled to income support (IS) from and including 20 September 2004.  This was because he was treated as having actual capital of £693.02 and notional capital of £49,000 on 20 September 2004 and actual capital of £871.53 and notional capital of £36,108.72 on 11 November 2005 as he had deprived himself of this capital for the purpose of securing his entitlement to IS.

2.	I grant leave and with the consent of Mr Hatton of the Law Centre (NI) representing the claimant and Ms Rush of Decision Making Services Branch, representing the Department, treat the application as an appeal and determine any questions arising thereon as if they arose on appeal.

3.	The background to the case is that the claimant had been on IS from on or about 1995.  On 1 September 2004 he executed a voluntary transfer of property by which he transferred the unencumbered fee simple of the property which he owned to his brother.  The property comprised a run down cottage and a half acre site which the Valuation Office valued at £60,000.  This valuation was not disputed.  The claimant lived in this property until 20 September 2004 when he moved to another dwelling.

4.	There was a review of the claimant’s IS and on 11 April 2005 he completed an IS claim form A2 which gave his new address.  The Department then requested details regarding the sale of the former home.  On 10 August 2005 correspondence was received from the claimant’s solicitors stating the claimant had signed over the premises to his brother in order to clear outstanding debts.  On further enquiry the claimant informed the Department that these debts totalled £4100 and were incurred during the period 1994-95.  At hearing before the tribunal he stated that the debts were in the region of £6000 - £7000.

5.	The claimant attended the hearing by the tribunal and was represented by his solicitor.  His brother also attended the said hearing.  At hearing the solicitor informed the tribunal that the former home was a derelict cottage.  It appears to have been condemned and a closing order was to be issued by the Northern Ireland Housing Executive though this had not been issued one year after the claimant left.  It is uncertain exactly when the property was condemned.

6.	The solicitor informed the tribunal that it had been suggested, on medical advice, that the claimant leave the property.  The tribunal had before it (inter alia) an undated letter from the claimant apparently written in reply to the Department’s letter of 6 September 2005 that he had transferred the premises to his brother because:

(1)	it had been condemned by the Housing Executive and deemed unfit to live in;

(2)	due to his housing conditions his physical and mental health was deteriorating;

	(3)	his CPN (I take this to mean Community Psychiatric Nurse) was advising him that his standard of accommodation was having a negative effect on his health;

(4)	he had debts of some £4100 to his brother incurred in 1994-95 which his brother now wished to have repaid.

7.	The tribunal also had before it (inter alia) a letter dated 9 May 2006 from the claimant’s General Practitioner (GP).  That letter was in the following terms:

	“[The claimant] has asked me to write to you in support of his appeal against withdrawal of his incapacity benefit.  He has a long standing history of psychiatric problems which he feels have not been fully taken into consideration when his benefits were withdrawn.

	In February 2004 [the claimant] was diagnosed with a form of cancer of the testicle known as teratoma he was treated with surgery and since then has closely been followed up at the Oncology department at Belfast City Hosptial he is having regular tests to assess whether there is any sign of recurrence of the tumour so far these tests have all proved negative and no further treatment has been required however he will continue to be monitored for the foreseeable future.  [The claimant] had pre existing psychiatric problem, he has been diagnosed with schizophrenia for which he is on medication he attends a psychiatrist Dr Mangan at Craigavon Hospital.

	When [the claimant] was informed of the diagnosis of a malignant tumour of his testicle he now states that he panicked and made the incorrect assumption that he was going to die, he therefore decided that he should give his home away to his brother, he states he did this because he owed his brother some money, he tells me that he did not receive any payment nor did he seek any payment for this transaction as he was of the opinion that his own death was imminent.  I understand that for this reason all his benefits from the date of transfer of the property have been withdrawn so that he is now in debt to the benefits agency to the tune of some £7000 pounds.  He tells me that he has had to go back to work as a result although he feels that he is medically unfit for work.

	I can confirm that [the claimant] does suffer from schizophrenia and that this almost certainly had a negative effect on his ability to cope with the prospect of the diagnosis of cancer even though it appears there is no evidence that he was informed that his condition was likely to be terminal.

	I trust this information will be taken into consideration when his case comes up for appeal.”

8.	The solicitor informed the tribunal that the claimant’s brother proposed to demolish the property and rebuild premises for himself and his family and install a “granny” flat for the claimant.  This the claimant accepted in principle.  He would have a life interest in the property.  It was agreed that there was no written agreement concerning the money.  The claimant informed the tribunal that he was under psychiatric care and, having been diagnosed with cancer, wanted the property kept in the family name.  It was accepted that the claimant was capable of managing his own affairs.  His brother stated that had the claimant sold the property to a third party, the money would not have lasted a year.

9.	The tribunal considered the evidence and found that of the claimant and his brother “not at all convincing”.  It concluded that if any money had been given by the brother to the claimant this was more likely to have been by way of a gift.  Were it otherwise it could easily have been reflected in the deed of transfer between the brothers.  This was not done, the transfer being “entirely voluntary”.  It also noted that there had been no written agreement drawn up concerning the building of a “granny” flat for the claimant.

10.	I pause here to state that I do not consider there was any perversity in the tribunal’s assessment of the evidence.  It was entitled to reject, as it did, the explanations put forward by and on behalf of the claimant and his brother and it has explained why it did so.

11.	In the documentary submissions and at hearing Mr Hatton put forward four grounds of appeal, the first three of which were opposed by Ms Rush, she did, however, both in documentary submissions and at hearing, agree with the fourth ground ie that the tribunal had erred in law in that it failed to specify the amount of notional capital to be attributed to the claimant and had not correctly applied the diminishing notional capital rule.  Unsurprisingly Mr Hatton accepted this submission.

12.	I held a hearing which the claimant attended accompanied by Mr Hatton and which Ms Rush attended.  At hearing both representatives were content that, if I found the only error to be that put forward by Ms Rush, I should deal with the matter rather than remit it to another tribunal.  Mr Hatton did, of course, reiterate his original four grounds of appeal in addition to agreeing with Ms Rush as indicated above.

13.	There are essentially two errors being alleged by Ms Rush.  The first is that there was an error in the tribunal not clearly specifying the amount of notional capital.  The tribunal upheld the Department’s decision dated 11 November 2005.  That decision specified the amount of notional capital as at 20 September 2004 at £49,900.  This it appears is made up by deducting 10% from the £60,000 market value (as prescribed by regulation 49 of the Income Support (General) Regulations (Northern Ireland) 1987 and then deducting £4100 for the debts.  In Ms Rush’s submission the claimant’s notional capital consisted of the land.  Its value had to be calculated in accordance with regulation 49 of the Income Support (General) Regulations (Northern Ireland) 1987.

14.	Regulation 49 provides that capital shall be calculated at its current market value, less (where there would be expenses attributable to sale) 10% and less also the amount of any encumbrance secured on the capital.  In this case there was no such encumbrance and the 10% would reduce the value to £54,000.  In Ms Rush’s submission the amount of any debt not secured on the capital could not be deducted.  It was not, in Ms Rush’s submission clear what exactly the tribunal considered to be the value of the notional capital.

15.	Mr Hatton (while agreeing that the tribunal had been insufficiently specific as to the amount of the notional capital in that it had not specified the amount of the debt to be deducted) submitted that the amount of the debt should be deducted from the value of the capital.  In Mr Hatton’s submission so much of the capital as was required to discharge the debt should not be treated as notional capital, it not being capital of which the claimant had deprived himself for the purpose of securing entitlement to IS or increasing the amount thereof (regulation 51).

16.	I agree that the tribunal erred in that it upheld a departmental decision valuing the notional capital of £49,900 at 20 September 2004 but appeared (per its reasons) to consider there to be no debt to be repaid to the brother.  That is obviously inconsistent.  On a finding that there was no debt no deduction should have been made.  It is an error of law.

17.	It appears to me that whether there is a debt or not is irrelevant unless the debt is secured on the capital.  This is because regulation 51 is concerned with the purpose of a deprivation of capital.  In this case that capital was the former home.  If the claimant deprived himself of that former home for the purpose of securing or increasing IS then he is to be treated as possessing the former home.  Article 49 applies to fix the value of the home and makes no provision for the deduction of any debts other than secured encumbrances.

18.	Had the claimant sold the property and used part of the proceeds of sale to pay off a debt which he was obliged to pay, it may well be that this payment off would not be considered as a deprivation of capital.  If, however, he then gave the remaining capital away he could not say that he did that to discharge his debt.  In this case however it was the land which was not divided which was transferred.  If it was correctly found that the land was transferred for the purpose of securing or increasing the amount of IS then that land is the capital (not too much of that land as was needed to discharge the debt) and regulations 51 and 49 apply.  The only deduction from the market value is the 10% for expenses of sale.

19.	I also consider that the tribunal erred in that it did not apply the diminishing notional capital rule in regulation 51A.  Instead it upheld the Department’s decision which did not apply that rule.  The Department’s decision deducted sums for “reasonable expenditure for normal living expenses” and for rent and rates.  Regulation 51A is to be applied where, as here, a claimant is treated as possessing notional capital within regulation 51.  It permits reduction of that notional capital for weeks subsequent to the week a claimant is first treated as possessing it.  The reduction to be applied varies according to the circumstances.  Where as here the claimant would have been entitled to IS but for regulation 51(1), regulation 51A(3) applies.  Essentially the capital is to be reduced at a weekly rate equal to the amount of IS and housing benefit to which the claimant would have been entitled were he not subject to regulation 51(1).  The tribunal’s failure to apply regulation 51A was an error of law and is another reason why I set its decision aside.

20.	I come then to consider whether the tribunal erred in any of the first three grounds put forward by Mr Hatton.  The first submission was that it had misapplied the burden of proof.  Mr Hatton submitted that the tribunal had reversed that burden and required the claimant to prove that he had not deprived himself of the property for IS purposes.  The Department put forward no evidence as to “why it decided that” the claimant had disposed of capital for IS purposes other than a reference to the fact that he had been on benefit since 1995 and would know the capital limits.  Mr Hatton submitted further that a knowledge of the capital limits did not confirm that the claimant had disposed of capital for IS purposes.  Also a knowledge of the benefit system and of the capital limits should not be inferred simply because the claimant had been on benefit for some time.

21.	Mr Hatton’s second ground was that the tribunal had failed to give due consideration to the issues raised before it and had given inadequate reasons for its decision.  His third ground was that the tribunal had made insufficient findings of fact to support its decision particularly in relation to the claimant’s knowledge of the capital limits.  In support of his contentions Mr Hatton referred to decision R(SB)9/91 as authority for the proposition that while the securing of benefit entitlement need not be the predominant motive for regulation 51 to apply.  It must, however, be a “significant operative purpose”.  I did not understand Ms Rush to dispute this last.  Mr Hatton submitted further that it must be shown that the claimant had a positive intention to secure benefit entitlement.  The fact that security benefit may have been a foreseeable consequence of an action did not lead automatically to the conclusion that this was the intention behind the action.  The Department had put forward no evidence to establish this other than a reference to the claimant’s having been on benefit for some time and knowing the capital rules.

22.	Mr Hatton accepted that it was unlikely that, in cases of this type, there would be any direct or objective evidence available to show what the claimant’s intentions were at the relevant time and that inferences could be drawn from the facts.  He submitted, however, that the tribunal had not explained how it had done that.

23.	Ms Rush, apart from the errors set out above opposed the grounds set forward by Mr Hatton.  He submitted that the tribunal had examined the facts as presented, assessed the evidence and clearly explained why it had reached the conclusions it did.  The small size of the debt to the brother compared to the value of the land, the claimant’s capacity to manage his affairs and the medical evidence were all considered.

24.	In connection with the above-mentioned grounds put forward by Mr Hatton and opposed by Ms Rush, the tribunal has obviously drawn inferences, as it was entitled to do, from the fact situation ie the voluntary nature of the transfer, his capacity to manage his affairs, the very large discrepancy in the amount of the debts and the value of the property, the absence of any mention of the debt in the deed of transfer; the absence of any mention of the brother’s stated future intention of housing the claimant in the deed of transfer.  The tribunal also commented on the fact that it found the evidence of the claimant and his brother less than convincing.  The reasons for the inferences are I think clear – essentially the facts lead to the inferences.  The tribunal did not deal with whether or not the claimant had express knowledge of the capital limits for IS though commenting that he had been on IS since in or about 1995.  The claimant had stated he sold the property to clear his outstanding debts but the tribunal rejected (and on the evidence I think it was entitled to reject) this evidence as to the purpose of the sale.  It was also undisputed that the claimant did not tell the Department that he had sold the property until after it made express enquiries some months after the sale.

25.	Mr Hatton has relied on R(SB) 12/91 as authority for the proposition that without knowledge of the capital limit for IS the claimant cannot be caught by regulation 51.  That case was actually under the old supplementary benefit legislation but the principles are the same.  The case was unusual in that (paragraph 9) the tribunal’s factual conclusions appear somewhat contradictory in that it found the claimant did not know of the limits then found the deprivation to have been to secure the benefit.  I do, however, accept that some knowledge of a capital limit rule is necessary.  However, I do not think a precise knowledge of the amount of the capital limit is always necessary only such knowledge (which may be fairly minimal and general) which would be sufficient to enable it to be proved that the purpose of deprivation was within regulation 51(1).

26.	Some assistance may be gained from decision R(SB) 40/85 (again a decision under the old supplementary benefit legislation).  There (paragraph 9) it was stated:

	“… Again some question has been raised as to the state of the claimant’s knowledge of the capital limits and a finding will be necessary, though one might think that it was common knowledge that supplementary benefit was a means-tested benefit and that there must be some limit on one’s capital holding above which supplementary benefit was not payable.  It is certainly possible for a person without knowledge of the details of the restriction to have the purpose of depriving himself of resources with a view to securing, or increasing the amount of, supplementary benefit.”

	I agree with the final sentence extracted above.  The decision emphasises (again at paragraph 9) the need for consideration of all the surrounding circumstances both for and against the Department’s contention.

27.	In both CIS 124/1990 and R(SB) 2/91 the necessity is stressed of a positive finding of fact based on sufficient evidence, that the person knew of the existence of a capital limit.

28.	In this present case there was no issue actually raised as to knowledge of a capital limit equally no positive finding was made as to same.  I think that here, where the burden was on the Department, such a finding was needed.  There must be a foundation of findings of fact on which the application of regulation 51(1) can be founded.  There may well have been an implied conclusion sufficient to comply with R(SB) 40/85 in this case.  I cannot reach a conclusion on that and no actual finding was made.  I conclude, albeit with some reluctance, that in the absence of same the decision is in error of law and I set it aside for that reason.

29.	The new tribunal to which I am remitting the matter should bear in mind the views set out in R(SB) 40/85.  The Department should produce its evidence as to the leaflets etc sent to the claimant as to capital limits.  The claimant should, however, be aware that, in line with R(SB) 40/85 the tribunal may be entitled to conclude from the surrounding circumstances (even without evidence of the claimant’s specific knowledge) that the claimant was aware there was some limit to capital which could be possessed for IS purposes and that regulation 51(1) applied.  In short he may be no better off.  The tribunal should also bear in mind the views set out in paragraph 11 of decision CIS/124/1990 and the views expressed above concerning debts not secured on the land and the application of the notional capital rules if relevant.

(signed):  M F Brown

Commissioner

13 November 2007