IS-v-Department for Social Development (HB) [2015] NICom 45
Decision No:  C1/15-16(HB)

SOCIAL SECURITY ADMINISTRATION (NORTHERN IRELAND) ACT 1992

SOCIAL SECURITY (NORTHERN IRELAND) ORDER 1998

HOUSING BENEFIT

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 February 2013

DECISION OF THE SOCIAL SECURITY COMMISSIONER

1.	This is claimant’s application for leave to appeal from the decision of a tribunal sitting at Belfast.

2.	An oral hearing has not been requested and I consider that the proceedings can properly be determined without a hearing.

3.	For the reasons I give below, I grant leave to appeal. However, I disallow the appeal.

	REASONS

	Background

4.	The applicant became the sole owner occupier of a property from April 2004 upon the death of her husband.  On 20 February 2005 she declared a settlement trust, naming two sons and a daughter as the trustees.  She was named as a beneficiary of the trust along with another daughter and her grandchildren.  In April 2005 she transferred the property to the trustees.  The trustees sold the property for the sum of £63,000 in June 2005 with her consent.  The trustees then purchased a new property for the sum of £109,000, having raised a mortgage of just under £59,399.  The trustees and the applicant completed a memorandum of agreement on 17 June 2005 under which she would be liable to pay rent of £450 per month as tenant of the new property for a term of 12 months.  The applicant claimed housing benefit (HB) from the Northern Ireland Housing Executive (the Executive) on 27 October 2005.

5.	The Executive decided that the applicant was not entitled to HB as she was a beneficiary of a trust whose trustees were her landlords.  The Executive also decided that the tenancy had been created to take advantage of the HB scheme.  The applicant appealed.  A tribunal on 5 March 2007 disallowed the appeal.  A statement of reasons for the first tribunal’s decision was issued on 8 June 2007.  The applicant appealed to the Social Security Commissioner, who decided on 10 April 2008 that the tribunal had not erred in finding that the applicant was a beneficiary of the trust.  However, he remitted the appeal to the tribunal to determine if the applicant was entitled to HB for rates.  The second tribunal decided on 9 July 2009 that the applicant was entitled to HB in respect of rates from 17 June 2005.

6.	On 25 June 2007 the applicant disclaimed her interest as a beneficiary of the trust.  She signed a tenancy agreement for a term of three years at a monthly rent of £450 on 5 January 2009.  She made a further claim for HB on 28 August 2009.  As the applicant had an existing award of HB for rates, this was treated as a supersession application.  The applicant was asked by the NIHE why she had disclaimed her interest in the trust.  The reason given on 10 March 2010 was that it was because of tax liabilities arising from income tax and inheritance tax.  On 31 March 2010 the Executive refused to supersede the existing award.  The applicant appealed.

7.	On 16 February 2012 a third tribunal, consisting of a legally qualified member and a financially qualified member, disallowed the appeal.  The applicant requested a statement of reasons for the tribunal’s decision and this was issued on 22 June 2012.  The applicant requested leave to appeal to the Social Security Commissioner but on 26 September 2013 the LQM refused leave to appeal.  On 30 September 2013 the applicant applied to a Social Security Commissioner for leave to appeal.

	Grounds

8.	The applicant, through her representative, submits that the tribunal erred in law by:

(i)	failing to apply regulation 9 of the Housing Benefit Regulations (NI) 2006 correctly;

(ii)	failing to make adequate findings of fact regarding income tax liability;

(iii)	failing to make adequate findings as regards inheritance tax liability;

(iv)	taking into account an irrelevant matter – namely the affordability of the rent to the applicant;

(v)	making an irrational finding regarding the affordability of the rent;

(vi)	failing to allow matters to be reconsidered by wrongly applying the principle of issue estoppel or by failing to consider supersession on the grounds of ignorance/mistake as to a material fact;

(vii)	breaching the rules of natural justice by a variety of procedural irregularities;

(viii)	infringing the applicant’s rights under Article 6 of the ECHR for a variety of procedural irregularities.

9.	The Executive was invited to make observations on the applicant’s grounds.  Mr Crilly of Decision Making Services (DMS) replied on behalf of the Executive.  He submitted that the tribunal had not erred in law on any of the grounds raised in the application for leave to appeal, save for a ground which raised the question of whether the applicant’s tenancy was on a commercial basis.  While accepting that there was an error in the tribunal’s decision, he asked the Commissioner to give the decision the tribunal should have given on this issue and to disallow the appeal.

	The tribunal’s decision

10.	The tribunal’s handwritten notification of its decision, which was issued by post on 20 February 2012, states that the applicant was not entitled to HB “in accordance with Housing Benefit Regulation 9(1)(l)”.  I mention this fact as the precise nature of the decision taken by the tribunal is disputed by the applicant and this formulation of the tribunal decision is important.

11.	The tribunal’s statement of reasons sets out the background facts of the case.  It shows that the tribunal treated the issue in the appeal as whether there should be a supersession of the existing HB award on grounds of a relevant change of circumstances.  It recorded that the applicant had requested a supersession in her letter of 21 January 2010 on the basis that she was no longer a beneficiary of the trust by virtue of the disclaimer dated 25 June 2007.

12.	The tribunal records that the applicant sought to bring further argument about financial difficulties or wishing to leave the previous address through fear of crime.  The tribunal declined to address these on the basis that they did not amount to changes of circumstances enabling it to look again into the earlier period, and also on the basis that these matters had been argued and determined before the previous tribunal.

13.	The tribunal considered the applicant’s submission that she had relinquished her beneficial interest under the trust for tax reasons, and rejected the credibility of that submission.  It found that the real reason for the applicant relinquishing her interest in the trust within 17 days of the first tribunal’s statement of reasons was to acquire entitlement to HB.  The tribunal found that the trust would save around £600 or so a year in income tax, but that the claimant would gain between £3,700 and £4,414 in HB each year.  It rejected the proposition that the relinquishing of interest in the trust was related to inheritance tax, where the threshold was £280,000, whereas the value of property transferred by the applicant to the trust was £63,000.  The tribunal did not accept that the property subsequently acquired by the trust would form part of the applicant’s estate, even if prospective house price rises brought its value over the inheritance tax threshold.

14.	The tribunal addressed the case of Frish v Barclays Bank Ltd and Another [1955] 2 QB 541, cited in Upper Tribunal decision SD v London Borough of Brent [2009] UKUT 7 (CH/4/2008), and relied upon by the applicant.  The tribunal found that it was within the trustees power “to apply any trust property for the advancement or benefit of the beneficiary” under clause 3.3 of the settlement.  The tribunal reasoned that, as the applicant could have been permitted to occupy the property, notwithstanding her contention that the tenancy was a commercial arrangement, she was a beneficiary under the trust.

15.	The tribunal found that there were no grounds to supersede the decision of 5 March 2007 and disallowed the appeal. 

	Relevant legislation

16.	The legislative provision of greatest relevance to this application is regulation 9 of the Housing Benefit (Persons who have attained the qualifying age for State Pension Credit) Regulations (NI) 2006 (2000, No.406) (the HBPC Regulations).  This provides as follows:

9.—(1) A person who is liable to make payments in respect of a dwelling shall be treated as if he were not so liable where—

(a) the tenancy or other agreement pursuant to which he occupies the dwelling is not on a commercial basis;

(b) his liability under the agreement is to a person who also resides in the dwelling and who is a close relative of his or of his partner;

(c) his liability under the agreement is—

(i) to his former partner and is in respect of a dwelling which he and his former partner occupied before they ceased to be partners, or

(ii) to his partner’s former partner and is in respect of a dwelling which his partner and his partner’s former partner occupied before they ceased to be partners;

(d) he is responsible, or his partner is responsible, for a child of the person to whom he is liable under the agreement;

(e) subject to paragraph (3), his liability under the agreement is to a company or a trustee of a trust of which—

(i) he or his partner;

(ii) his or his partner’s close relative who resides with him, or

(iii) his or his partner’s former partner,

is, in the case of a company, a director or an employee, or, in the case of a trust, a trustee or a beneficiary;

(f) his liability under the agreement is to a trustee of a trust of which his or his partner’s child is a beneficiary;

(g) subject to paragraph (3), before the liability was created, he was a non-dependant of someone who resided, and continues to reside, in the dwelling;

(h) he previously owned, or his partner previously owned, the dwelling in respect of which the liability arises and less than 5 years have elapsed since he or, as the case may be, his partner, ceased to own the property, save that this sub-paragraph shall not apply where he satisfies the appropriate authority that he or his partner could not have continued to occupy that dwelling without relinquishing ownership;

(i) his occupation, or his partner’s occupation, of the dwelling is a condition of his or his partner’s employment by the landlord;

(j) he is a member of, and is wholly maintained (disregarding any liability he may have to make payments in respect of the dwelling he occupies as his home) by, a religious order;

(k) he is in residential accommodation;

(l) in a case to which the preceding sub-paragraphs do not apply, the appropriate authority is satisfied that the liability was created to take advantage of the housing benefit scheme established under Part VII of the Act.

(2) In determining whether a tenancy or other agreement pursuant to which a person occupies a dwelling is not on a commercial basis regard shall be had inter alia to whether the terms upon which the person occupies the dwelling include terms which are not enforceable at law.

(3) Paragraph (1)(e) and (g) shall not apply in a case where the person satisfies the appropriate authority that the liability was not intended to be a means of taking advantage of the housing benefit scheme.

(4) … (not relevant)

	Submissions

17.	The applicant, through her representative, makes a number of submissions as follows.

18.	She submits that, whereas the Executive’s decision was grounded on regulation 9(1)(l) of the HBPC Regulations, the tribunal relied on regulation 9(1)(e) and made inconsistent statements as to whether or not the applicant was a beneficiary.

19.	She submits that, having found that the applicant was a beneficiary, and therefore someone who fell within one of the sub-paragraphs of regulation 9(1)(e)-(g), the tribunal erred by failing to address regulation 9(3).  Alternatively, she submitted that the tribunal was wrong to find that regulation 9(1)(e) applied, but that the Executive had not discharged the burden of proof to show that regulation 9(1)(l) applied, having provided no evidence about this.  She criticised the Executive for failing to support its arguments on the income tax issues with evidence on the basis of unsubstantiated cost estimates.

20.	To the extent that the tribunal had investigated the issue of income tax, the applicant submits that the tribunal found that an income tax saving was made, and that this did not connote that the arrangement had been devised to take advantage of the HB scheme.  The applicant further criticised the tribunal’s understanding of the inheritance tax situation and the “gift with reservation”.

21.	The applicant submits that the issue of the affordability of rent to the applicant was an irrelevant consideration, relying on R v Stratford-upon-Avon BC ex parte White [1999] 31 HLR 126.  She submits that the tribunal wrongly placed emphasis on the applicant paying off credit card debts while assessing whether she could have afforded the rent without HB.  The applicant submits that the Executive produced no evidence on the financial issues, relying on hearsay statements of officers who did not attend the hearing.

22.	The applicant submits that the tribunal erred by failing to allow the issues before the first tribunal to be re-litigated, as no principle of finality arose in HB cases.  Alternatively, she submits that the tribunal should have addressed the question of whether there were grounds to supersede for mistake as to material fact, relying on an error admitted by the NIHE at page 7 of its submission.

23.	The applicant submits that there was a breach of the rules of natural justice arising from the fact that the tribunal did not read the applicant’s submission in advance of the hearing.  Alternatively, she submits that the tribunal treated the parties in a differential manner by not sanctioning the Executive’s failure to produce a further submission as per the tribunal’s direction of 3 October 2011.  She submits that the financial member pre-judged issues by his comment in the record of proceedings that “there was no inheritance issues [sic] in play”.

24.	Finally she submits that there was a violation of Article 6 of the European Convention on Human Rights and Fundamental Freedoms (ECHR) due to the failure of the tribunal to read the applicant’s submission in advance of the hearing and due to the Executive’s failure to comply with a direction, due to granting four postponements but refusing a request for an extension of time to the applicant, and to the financial member’s comments.  On this basis she submits that there was no equality of arms in the proceedings.

25.	For the Department Mr Crilly submits that the tribunal has erred in some respects in its application of regulation 9(1)(l) of the HBPC Regulations, but that the error does not vitiate the decision.  He submits that the liability to make payments in respect of occupying the dwelling was not created by the revocation by the claimant of her interest in the trust, but from the date of the original agreement to let the dwelling to her.  Mr Crilly therefore submits that the revocation of interest as a beneficiary did not represent a relevant change in circumstances.  Therefore, the tribunal was correct in its decision to refuse to supersede the existing award.

26.	He further submits that the tribunal should have considered the issue of whether or not a commercial tenancy existed for the purpose of regulation 9(1)(a) of the HBPC Regulations, as this had been raised in the course of the appeal, and that this omission represented an error of law.  He does not, however, support any of the grounds of application advanced by the applicant.

27.	In response, the applicant’s representative has not dealt with the principal submission of Mr Crilly.  He raises a number of factual issues which are in dispute.  He submits that the tribunal did not address regulation 9(1)(l) and that it erred by addressing only the issue of whether the applicant was a beneficiary of the trust.  He submits that by disclaiming her interest in the trust the applicant made clear that the HB paid by way of rent to the trustees would somehow make its way back to her on exercise of the trustees’ discretion.

28.	The applicant’s representative submits that the tribunal failed to address particular submissions and to make its own findings of fact in respect of whether the first tribunal was aware of her having made rental payments.  He submits that non-payment of rent would lead to repossession and therefore the applicant’s claim to HB was not to take advantage of the HB scheme but to keep a roof over her head.  He refers to the risk of the applicant’s financial difficulties leading to repossession or eviction.

29.	He submits on the basis of Solihull MBC Housing Benefit Review Board v Simpson [1995] 1 FLR 140 that the tribunal failed to address the correct test of dominant purpose.  He relies on CH/3586/2005, a case concerning a mother renting from a son, and submits that this is on all fours with the present case.  He further relies on CH/0246/2006, a case concerned with intentional deprivation of capital.  He makes further submissions on the applicant’s motives in creating the trust settlement.

30.	The applicant further augmented her arguments in relation to issue estoppel, income tax, inheritance tax and affordability of rent.  She made submissions on the difference in the burden of proof between regulation 9(1)(e) and 9(1)(l) and to the effect that the tribunal had applied the wrong burden and that the NIHE relied upon hearsay evidence.  She further expanded her argument on breach of the rules of natural justice and Article 6 ECHR.

31.	Mr Crilly had nothing further to add in response.

	Assessment

32.	At the outset I will address a number of the applicant’s points which are directed at the decision making process within the Executive.  These raise the Executive’s alleged failure to obtain evidence before making its decision and to address points raised by the applicant, as evidenced by the chronology of the Executive’s adjudication processes.

33.	In deciding whether or not the tribunal has erred in law, I am concerned solely with the tribunal’s decision.  The tribunal was not in the position of reviewing the Executive’s decision.  Rather, its jurisdiction was that of an independent decision-maker and its obligation was to make a fresh decision on the evidence which it had before it.  In this process it was not restricted to the material which was before the Executive.  It was required to conduct fair proceedings with a view to making its own findings of fact based on all the evidence before it at the date of hearing and to apply the relevant law correctly to the facts as found.  Any possible shortcomings in the decision-making process of the Executive are not therefore material to the lawfulness of the tribunal’s decision, unless the tribunal replicated those shortcomings in its own decision.  Therefore, I consider that these points are misconceived.

34.	The applicant alleges that the tribunal breached the rules of natural justice in the proceedings.  She further alleges a violation of Article 6 of the European Convention on Human Rights.  I do not consider that there is any material difference between the concepts of natural justice and fair hearing such as would require me to treat these as separate issues, and indeed there is considerable overlap in the way in which the applicant has presented her grounds of application.

35.	Firstly, she alleges that the tribunal did not read the applicant’s written submission.  However, the tribunal’s record of proceedings clearly indicates that the tribunal realised that the submission prepared by the applicant’s representative was not before it, and adjourned so that it could be copied.  I see no indication that the points made by the applicant’s representative in his submission were not addressed by the tribunal.  The applicant relies on MT v Department for Work and Pensions [2010] UKUT 382.  However, I do not find that case of assistance in the present case, as it dealt with an entirely different set of circumstances, where a presenting officer failed to attend a hearing despite a direction to do so.

36.	Secondly, she submits that the Executive had been directed to make a submission in response to a submission by the applicant’s representative but failed to do so.  I do not understand what procedural unfairness to the applicant is said to result from this.  If anything, the failure of the Executive to adduce particular evidence or make submissions opposing the applicant’s case would be expected to favour the applicant.  I cannot see how the applicant has been disadvantaged in the determination of her appeal by any failure of the tribunal in these circumstances.

37.	Thirdly, it is submitted that unfairness is demonstrated by a comment of the financial member which appears in the record of proceedings and that it indicates a breach of natural justice and a violation of Article 6 ECHR.  The full comment by the financial member, Mr S, is in the context of asking questions of the representative, Mr C, and reads as follows:

“Mr S asked why she gave up her interest in the Trust.
Mr C – it was tax reasons, income tax and inheritance tax.
Mr S asked him to explain this – he stated he felt there was no inheritance tax issues [sic] in play”.

and later,

“Mr S: Inheritance tax threshold was £280,000.
Mr C agreed.
Mr S asked how he felt inheritance tax would be relevant given that his mother’s only asset was £63,000.”

38.	It appears to me that the financial member was not here stating a view which might indicate a closed mind on the issue.  Rather he was putting his doubts about the case advanced by the applicant for the purpose of obtaining further explanation.  This is an entirely appropriate way to proceed, as it could be procedurally unfair of the tribunal to make a decision based on a finding which was not put to a party for comment or response.  The exchange elicited the applicant’s submissions about the gift with reservation in response to the financial member’s questions and I consider that it was entirely consistent with the tribunal’s inquisitorial role.  I consider that it was not indicative of any breach of the rules of natural justice or a violation of Article 6 ECHR.

39.	The applicant’s representative alleges unfairness in the time limit to prepare his application to the LQM for leave to appeal and of a lack of response by the Appeals Service to his correspondence seeking additional time for making the application for leave to appeal.  He contrasts this with postponements and an adjournment to the tribunal proceedings.  The postponements and the adjournment were granted in the course of the tribunal proceedings in order that both parties would be able to make submissions to the tribunal.  I see no unfairness in these decisions, which were taken in the course of proper case management.

40.	It appears from the file that the correspondence of the applicant’s representative seeking extra time in which to make his application for leave to appeal was not dealt with by administrative staff in the Appeals Service.  However, I do not accept that a failure of administrative staff to address the post-hearing procedural application can demonstrate unfairness on the part of the tribunal.  The time limit for applying for leave to appeal is set by regulation 58(1)(a) of the Social Security and Child Support (Decisions and Appeals) Regulations (NI) 1999.  There is no mechanism to extend the time limit as such, but rather a procedure by which late applications may be admitted.  In the event, the applicant’s representative submitted the application in time.

41.	The LQM refused leave to appeal.  However, the comprehensive nature of the submissions advanced to the LQM does not suggest that there has been any material detriment to the applicant in the course of making that application.  Furthermore, the applicant now has renewed her application to me and I am considering the application for leave to appeal entirely afresh.  Therefore, I see no unfairness in these circumstances and I also consider this point to be misconceived.

42.	In the course of the appeal before the third tribunal, the applicant sought to revisit matters which had been decided by the first tribunal.  In particular, evidence was submitted about the levels of crime in the estate where the applicant had been living alone prior to October 2005.  It was submitted that the tribunal should have addressed these issues, rather than decline to consider them on the basis that they had been addressed by an earlier tribunal.  The applicant submits that the principle of finality in Article 17(2) of the Social Security (NI) Order 1998 does not apply in HB cases.

44.	This is correct.  However, in HB cases I consider that the principle of finality derives from a different statutory provision, namely paragraph 11 of Schedule 7 to the Child Support, Pensions and Social Security Act (Northern Ireland) 2000.  This provision would not prevent issues being raised anew by way of revision, supersession or appeal.  However, I am not satisfied that the matters raised by the applicant before the third tribunal, concerning anxiety for personal safety in her original property, gives grounds for supersession on the basis that the first tribunal’s decision was based on ignorance of or mistake as to a material fact.  These matters were aired before the first tribunal.  The first tribunal in particular noted that the trust settlement was effected before the applicant moved away from her first property and was not satisfied that “the stated motives were the driving force behind the arrangement”.  There can be no suggestion that the first tribunal was ignorant of, or mistaken as to, the alleged motive for moving, stating as it does in its statement of reasons that her intention “was to organise her finances better and to get away from the unsatisfactory area in which [the first property] was situated”.

45.	The applicant relies upon CH/2091/2005, which dealt with the jurisdiction of a tribunal in relation to an earlier decision of a local authority on notional capital which had not been appealed.  The Deputy Commissioner held that a tribunal was not bound by an earlier un-appealed decision of the public authority in the course of the appeal before it.  The position here is not that there is an earlier decision by the NIHE which has not been appealed, but rather that an earlier tribunal has addressed the same arguments advanced by the applicant and made findings on them.  I do not consider that CH/2091/2005 has a direct bearing on the present application.

46.	The applicant makes further submissions on the procedural issue of burden of proof.  On a proper analysis of regulation 9(1)(l) and regulation 9(3) the tribunal must be satisfied that a liability was created to take advantage of the HB scheme, but where regulation 9(3) is engaged on the basis that the claimant is a beneficiary under regulation 9(1)(e), the claimant must demonstrate to the decision maker that the liability was not so created.  The applicant analyses this in terms of burden of proof.  However, I do not consider that this is an appropriate approach in the case of tribunal proceedings.

47.	As stated by Baroness Hale at paragraph 61-62 of Kerr v. Department for Social Development [2004] UKHL 23 (also reported as an annex to R1/04(SF)), the process of benefits adjudication is inquisitorial rather than adversarial.  In determining entitlement to benefit, both the claimant and the public authority must play their part.  The public authority is the one which knows what questions it needs to ask and what information it needs to have in order to determine whether the conditions of entitlement have been met.  The claimant is the one who generally speaking can and must supply that information.  Lord Hope in Kerr v. Department for Social Development has said at paragraph 15:

“in this situation there is no formal burden of proof on either side.  The process is essentially a fact-gathering exercise, conducted largely if not entirely on paper, to which both the claimant and the Department must contribute”.

48.	When a decision taken by the NIHE is appealed, the appeal tribunal stands in the shoes of the NIHE and has the power to consider any issue and make any decision the NIHE could have made (R(IB)2/04).  The principles set out by Lord Hope at paragraph 16 of Kerr v. Department for Social Development equally apply in the context of an appeal.  The applicant submits that the NIHE failed to submit relevant financial evidence in relation to the taxation issues which arose and therefore did not discharge the burden of proof.  However, the issue before the tribunal was the assessment of the intentions of the applicant for the purposes of regulation 9(1)(l) and regulation 9(3).  In essence the issue before the tribunal did not involve a formal burden of proof but simply the question of whether the conditions of regulation 9(1)(l) or 9(3) were satisfied.  In the case of regulation 9(1)(l) the issue was whether an intention to take advantage of the HB scheme was present.  In the case of regulation 9(3) the issue was whether an intention to take advantage of the HB scheme was not present.  There was adequate information before the tribunal to determine that question and it was entitled as a matter of law to reach the decision on the amount of evidence it had.

49.	Turning to the substantive issues in the proceedings, it appear to me that the principal issue is whether there has been a relevant change of circumstances, such as to enable the initial refusal of HB in respect of rent to be superseded in the applicant’s favour.

50.	The applicant was previously refused HB on the basis that she had a liability to make payments in respect of a dwelling under a memorandum of agreement dated 17 June 2005, but that the liability was to three of her children who were trustees of a trust of which she was a beneficiary, and she had not shown that the liability was not intended to be a means of taking advantage of the HB scheme.  Although this decision was made under the former regulation 7 of the Housing Benefit (General) Regulations 1987, which were then in operation, these were replaced for the purposes of the present case from 20 November 2006 by the HBPC Regulations.  The equivalent provisions to those on which the decision was based are regulation 9(1)(e) and regulation 9(3) of the HBPC Regulations.

51.	However, two other provisions could have potential application to the applicant’s case as alternative or additional grounds for refusing HB.  These are regulation 9(1)(a) which deals with liabilities to make payments in respect of a dwelling which are other than on a commercial basis, and regulation 9(1)(l) which deals with liabilities to make payments in respect of a dwelling which are created to take advantage of the HB scheme.  These will be discussed further below.

52.	The applicant’s fresh claim for HB dated 28 August 2009 was treated as an application for supersession because she already had an existing award of HB in respect of rates deriving from the second tribunal’s decision.  Supersession in HB cases is governed by regulation 7 of the Housing Benefit (Decisions and Appeals) Regulations (NI) 2001.  Grounds for supersession can include change of circumstances, error of law, ignorance of material fact and mistake as to material fact.  A potentially relevant change of circumstances in this case was that the applicant had, on 25 June 2007, disclaimed any interest she had as beneficiary of the trust.

53.	The applicant points out that the tribunal stated that it was “proceeding today on the basis of a relevant change of circumstances – namely [the applicant] was no longer a beneficiary under the Trust”.  Yet she points out that the penultimate paragraph includes the words “we conclude … that for the purposes of regulation 9(1)(e) of the 2006 Regulations she is therefore a beneficiary of the Trust”.  The case was not argued before the tribunal on the basis that the disclaimer of interest in the Trust was ineffective.  There is therefore something anomalous in the tribunal record.  However, having considered the tribunal’s statement of reasons, I understand that the tribunal makes these statements in the particular context of dealing with the applicant’s submission in relation to the case of Frish.

54.	In Frish, the Court of Appeal in England and Wales addressed a point under the Landlord and Tenant Act 1954 (which did not extend to Northern Ireland).  The issue was the right to the renewal of a business tenancy, where a landlord proposed not to renew but rather to enter into a new tenancy agreement with a party who was a beneficiary under the trusts held by the landlords.  This could have the effect of defeating the previous business tenant’s security of tenure, as the Act provided for non-renewal where the landlord intended to occupy the premises for the purposes of a business carried on by him in the building.  The definition of landlord extended, where the landlord’s interest was held on trust, to the “beneficiaries under the trust or any of them”.  It was necessary for the Court to consider the correct construction of the term “beneficiaries under the trust” in section 41(2) of that Act.  The Court held that the words were limited to the situation where the beneficiaries had an interest under the trusts to entitle them to occupation or, on application, to be let into occupation.  As the particular beneficiary had no right of occupation, but simply happened to have a beneficial interest, the Court held that that the term did not extend to him for the purposes of the Landlord and Tenant Act.

55.	In Upper Tribunal case SD v London Borough of Brent [2009] UKUT 7 (CH/4/2008), Judge Bano, on considering the Frish decision, said that he saw:

“no reason not to apply the same principle to regulation 9(1)(e) of the 2006 regulations, and accordingly to limit the application of the provision to those cases where there is power under the trust (other than by the grant of a lease) to provide the claimant with the accommodation in respect of which the claim for housing benefit has been made”.

56.	I consider that the context in which the tribunal was addressing regulation 9(1)(e) in its statement of reasons was to address the argument that the applicant had never been a beneficiary, following Frish and SD.  The tribunal reasons that the applicant was a beneficiary due to paragraph 3.3 of the Trust settlement.  Therefore, while I accept that the tribunal makes a confusing reference to the applicant being a beneficiary of the Trust for the purposes of regulation 9(1)(e), I consider that it is clear that this is addressed to the historic position from February 2005 to June 2007, as the tribunal has earlier accepted that the applicant ceased to be a beneficiary upon the disclaimer.  It is my understanding that the tribunal reasoned that during this period the applicant was a beneficiary of the Trust, who could have been permitted to reside under the terms of the Trust without any commercial agreement, notwithstanding Frish and SD.  I consider that this aspect of the reasons is confusing, but not such as to amount to an error of law.

57.	It appears to me that the tribunal accepted that the applicant ceased to be a beneficiary in June 2007, and principally addressed the issue of regulation 9(1)(l) of the HBPC Regulations in its decision.  However, some further confusion is sown by the actual text of the statement of reasons.  There the tribunal observed that the Executive’s decision to disallow the award was made on the basis that “her relinquishment of her beneficial interest was created to take advantage of the Housing Benefit Scheme”, but referring to regulation 9(1)(c) of the HBPC Regulations.  The applicant submits that the tribunal erred in law by addressing only the issue of whether the applicant was the beneficiary of a Trust, pointing to the need to address regulation 9(1)(l).  However, I believe that the reference to regulation 9(1)(c) is clearly a typographical error and that it should read, and was intended to read, regulation 9(1)(l).  In making this assessment, I take note of the handwritten notification of the decision of the tribunal.  I observe, in particular, that the tribunal in its handwritten notification of decision issued on 20 February 2012 says “she is therefore not entitled to Housing Benefit for the rent element in accordance with Housing Benefit Regulation 9(1)(l)”.

58.	In addressing regulation 9(1)(l), the tribunal turned its mind to the question of whether the act of disclaiming a beneficial interest in the trust was done with the intention of taking advantage of the HB scheme.  The tribunal heard evidence from the applicant’s son, a trustee, who submitted that the purpose of the applicant disclaiming her interest as a beneficiary was to save the trust money which it would otherwise be liable to pay in tax.  The tribunal did not accept this submission, but found that the purpose in the applicant disclaiming her interest as a beneficiary of the trust was to obtain HB by bringing herself outside regulation 9(1)(e).

59.	The applicant takes issue with the tribunal’s findings in relation to the issues of income tax liability and inheritance tax liability.  She submits that the tribunal did not properly investigate the tax points raised by her representative.  In relation to income tax, the tribunal made a finding that the disclaimer might have saved £600 in tax each year.  I do not understand this figure to be disputed.  The tribunal reasoned that the possible gain of between £3,700 and £4,400 of HB each year was more likely to be the material financial incentive in disclaiming interest as a beneficiary.  This finding was rational and it was open to the tribunal to make it.

60.	In relation to inheritance tax, there was a conflict as to how the £63,000 gifted to the trust in 2005 would attract inheritance tax when the relevant threshold was £280,000.  I appreciate that the applicant disputes the basis of liability.  She submits that the tribunal has overlooked that this would be treated by HMRC as a gift with reservation.  However, in addressing this and the income tax issue, the tribunal sat with a financially qualified member for the purpose of having an expert member provide guidance in making a decision.  It does not appear to me that the tribunal has failed to investigate the matter sufficiently, or has made inadequate findings of fact.  The tribunal observed that the value of the gift with reservation remained £63,000, whatever subsequent accumulation there might be of the property held by the trust.  It does not appear to me that the tribunal’s conclusions on the issues of tax are irrational.

61.	The applicant submits that the tribunal has raised an irrelevant factor in deciding that the applicant had not the means to afford the rent for the property without HB, and in considering her credit card debts.  These factors are relevant to the tribunal’s decision in so far as they were taken into account in the tribunal’s overall assessment of the credibility of the evidence of the applicant’s son.  I do not consider that they are irrelevant factors.  The evidence is entirely indicative of the position that the applicant could not afford to pay £450 rent without state support by way of HB.  This is plainly suggestive that the possibility of claiming from the HB scheme was a factor in the applicant’s decision to place her property on trust and to rent a further property, purchased in part from the proceeds of sale of her original property, back from the trust.  This is not an irrelevant factor.

62.	For the Department, Mr Crilly submits that the tribunal has erred in its approach, however.  The issue he raises is that in addressing regulation 9(1)(l) the tribunal has addressed its mind to the issue of whether the disclaimer of beneficial interest was aimed at taking advantage of the HB scheme.  He submits that this is to address the wrong question, since the real issue is whether the liability has been created to take advantage of the HB scheme.  He submits that the disclaimer of interest in the trust did not create the liability to make rental payments in respect of the property.  He submits that this was instead created by the trust settlement of 20 February 2005, which led to the tenancy agreement dated 17 June 2005, which was renewed on 5 January 2009.  While submitting that the tribunal misapplied the test in regulation 9(1)(l), he submits nonetheless that the tribunal reached the correct conclusion.  This was because the question of whether or not the applicant was a beneficiary made no difference to the core question of why the liability was created in the first place.

63.	As stated above, it appears to me that three different aspects of the HBPC Regulations are potentially relevant to the question of whether the applicant should not be treated as liable to make payments in respect of a dwelling.  This issue could arise firstly by regulation 9(1)(a), if the tenancy or other agreement pursuant to which the applicant occupies the dwelling is not on a commercial basis.  It could arise secondly by regulation 9(1)(e), if subject to paragraph (3), the applicant’s liability under the agreement is to a trustee of a trust of which she is a beneficiary.  The qualification of regulation 9(1)(e) by regulation 9(3) is to the effect that regulation 9(1))(e) shall not apply in a case where the applicant satisfies the appropriate authority that the liability was not intended to be a means of taking advantage of the housing benefit scheme.  Thirdly, the issue could arise by regulation 9(1)(l), where in a case to which regulations 9(1)(a)-(k) not apply, the appropriate authority is satisfied that the liability was created to take advantage of the housing benefit scheme.  It would be enough that the conditions of one of these aspects of regulation 9 are met for the applicant not to be entitled to HB.

64.	It appears that the tribunal has not addressed the first of these issues, namely regulation 9(1)(a) but has concentrated on regulation 9(1)(e) and 9(1)(l).  Mr Crilly submits that the failure to deal with regulation 9(1)(a) was an error of law.  I am not inclined to accept this submission, as a decision that any part of regulation 9(1) applied would be determinative of the appeal.  Failure to give attention to regulation 9(1)(a) would not have materially affected the outcome of the appeal, as the tribunal determined that another relevant part of regulation 9(1) applied.  I accept that it could have been a material error of law not to consider regulation 9(1)(a), had the decision of the tribunal been that neither 9(1)(e) or 9(1)(l) applied.  However, this was not the case.

65.	As the rent element of HB had been refused in the past on the basis of regulation 9(1)(e), having rejected the argument that the applicant was never a beneficiary on the basis of Frish, it was logical for the tribunal to address that issue in terms of the potential change of circumstances arising from the applicant disclaiming her interest in the trust.  The fact that the applicant had disclaimed her interest as a beneficiary was potentially relevant to the question of whether she had a liability to make payments in respect of a dwelling to a trustee of a trust of which she was a beneficiary.  However, the basis of the Executive decision which was the subject of the appeal was in fact regulation 9(1)(l).  Specifically the decision of 31 March 2010 reads:

“You state in your letter that the reason you are no longer a Beneficiary of the Trust is to ease the Tax costs for the Trust.  We have decided that this action was carried out to take advantage of the Housing Benefit system.  Therefore, you are not entitled to Housing Benefit for the rent element in accordance with Housing Benefit Regulation 9(1)(l)”.

66.	It can be seen that the NIHE links the application of regulation 9(1)(l) to the issue of the applicant having disclaimed her interest as a beneficiary.  However, the tribunal found that “all dealings in relation to the Trust and in the relinquishing of [the applicant’s] beneficial rights under the settlement was [sic] to secure Housing Benefit”.

67.	The submission of Mr Crilly highlights the statutory language in regulation 9(1)(l).  He submits that the key issue is whether the liability to make payments in respect of the dwelling was created to take advantage of the HB scheme.  I accept that there is force in his submission.  It is the issue of the applicant’s motive in entering into agreements with the Trust as a tenant that are directly relevant – not the motives behind the creation of the Trust or the disclaimer of beneficial interest as such.  However, it seems to me that the creation of the Trust and the subsequent disclaimer of beneficial interest are relevant in so far as they can help to understand the motives of the applicant in entering into the tenancy agreements.  The tribunal’s language may not have been entirely precise, yet it has ultimately addressed the correct questions.

68.	In CH/3586/2005, Deputy Commissioner Ovey said at paragraph 42:

42.	Again I am helped by the authorities produced by the claimant’s solicitors.  The Court of Appeal had to consider the predecessor of regulation 7(1)(l) in Solihull MBC Housing Benefits Review Board v. Simpson [1995] 1 F.L.R. 140.  Mr. Simpson had been living with his family, which included a child with a disability, in unsatisfactory council accommodation.  His father-in-law offered to buy a house in a suitable location which he would then rent to his daughter and son-in-law.  Mr. Simpson sought advice from the Citizens Advice Bureau and the council’s Housing Department on whether he would be entitled to housing benefit in those circumstances and was told he would not be disqualified, although no official confirmation of entitlement was obtained.  The arrangement proceeded and the claim was made.  The local authority, however, refused the claim on the basis that the liability had been created to take advantage of the scheme.  The Court of Appeal noted that it was commonplace for persons of limited means to enter into tenancies in expectation of obtaining housing benefit and that plainly the provision was not intended to catch all such claimants.  It then proceeded to consider in what circumstances the provision could properly be relied on.  The court concluded that, although bad faith was not necessary, the words “take advantage” showed that at least in the eye of the beholder there had to be conduct which appeared to some extent improper.  The requirement would be made out if the dominant purpose was to take advantage of the scheme when entering a particular tenancy, as opposed to achieving the reasonable satisfaction of housing needs.

69.	The applicant submits that she was in unsatisfactory accommodation and that her primary purpose was simply to leave the area she was living in.  However, that might have been achieved in a number of ways.  She might have sold her home and bought another, except that due to her age and financial circumstances she would be unlikely to obtain a mortgage.  Alternatively, she might have sold her home and used the proceeds to rent elsewhere.

70.	However, the mechanism she chose was to transfer her home to a Trust, who sold it to purchase another property which it rented back to her.  This property was some £46,000 more valuable than the one she had left.  The monthly mortgage liability was in the region of £240 per month.  However, the Trust entered into a rental agreement for the sum of £450 per month.  This had the effect that the applicant was enabled to live in a property which she could not otherwise afford, having elected to transfer away her interest in her own home.  It had the further effect that the Trust of which she was a beneficiary for a period would have accumulated any income in excess of the mortgage liability, albeit subject to tax and other liabilities.

71.	Public policy tends to prevent persons dependent on means tested benefits from acquiring an interest in property at public expense.  It further excludes persons who have capital assets in excess of prescribed limits from entitlement to means tested benefits.  Had the applicant sold her home to rent a new home in a different area from a private sector landlord, the proceeds of the sale of her home would have been in excess of that prescribed limit for HB, this would have precluded her from HB.  Had she succeeded in purchasing a new home in a different area on a mortgage while in receipt of a means tested benefit, she would not have been entitled to the additional housing costs by way of increases in her liability to pay mortgage interest which might have resulted.

72.	The creation of a Trust appeared to avoid the difficulties created by public policy.  However, in the final analysis, the improvement in the applicant’s accommodation situation could only have been achieved at public expense through HB.  In all the circumstances, I consider that the tribunal was entitled to find on the evidence that the applicant’s dealings in relation to the Trust, and in the relinquishing of the applicant’s beneficial rights under the settlement, were to secure HB.  The tribunal was entitled to find that the applicant had entered into liability to make payments in respect of the dwelling purchased by the Trust in order to take advantage of the HB scheme.

73.	The applicant has set out extensive argument as to how the tribunal has erred in law, and I consider that an arguable case was established, leading me to grant leave to appeal.  However, I do not accept that the tribunal has erred in law and I disallow the appeal.

(signed)  O Stockman

Commissioner

13 August 2015