EP-v-Department for Social Development (ESA) [2015] NICom 60
Decision No:  C9/14-15(ESA)

SOCIAL SECURITY ADMINISTRATION (NORTHERN IRELAND) ACT 1992

SOCIAL SECURITY (NORTHERN IRELAND) ORDER 1998

EMPLOYMENT AND SUPPORT ALLOWANCE

Appeal to a Social Security Commissioner
by the Department on a question of law from a Tribunal's decision
dated 17 June 2014

DECISION OF THE SOCIAL SECURITY COMMISSIONER

1.	The decision of the appeal tribunal dated 17 June 2014 is in error of law.  The error of law identified will be explained in more detail below.  Pursuant to the powers conferred on me by Article 15(8) of the Social Security (Northern Ireland) Order 1998, I set aside the decision appealed against.

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

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

4.	This decision will come as a disappointment to the claimant.  She was successful in her appeal to the appeal tribunal and I have now decided that the decision of the appeal tribunal must be set aside.  I have also directed that the appeal should be referred to a differently constituted appeal tribunal for re-determination.  This process will add to what have already been lengthy proceedings.  I would ask the claimant and her representative to note that the outcome of my decision is not that the claimant is not entitled to Employment and Support Allowance (ESA).  As will be noted in greater detail below, the claimant and her representative will be given a further opportunity to challenge the legal and evidential basis of the Departmental decision that she is not so entitled.

	Background

5.	The decision which was under appeal to the appeal tribunal below was a decision that the claimant was not entitled to ESA on the basis on a new claim to that benefit.  The specifics of the decision-making process giving rise to the appeal are set out immediately below.  Prior to seeking entitlement to ESA, the claimant had an entitlement to income support (IS) and, possibly, jobseeker’s allowance (JSA).  The specifics of any such awards are not readily apparent from the papers.  The relevance of the awards of entitlement to the two other social security benefits to the issues arising in the present appeal are set out, where appropriate, below.

6.	The claimant made a claim to ESA from and including 14 September 2012.  On 4 October 2012 a decision-maker of the Department decided that the claimant was not entitled to ESA from and including 14 September 2012.  In summary, the stated reason for the disallowance of entitlement to ESA was that the claimant had capital in excess of £16,000.

7.	An appeal against the decision dated 4 October 2012 was received in the Department on 29 October 2012.  On 18 October 2013 the decision dated 4 October 2012 was looked at again but was not changed.

8.	Following two adjournments, the substantive oral hearing of the appeal took place on Tuesday 17 June 2014.  It is important to note, however, that following the earlier adjournments, the Department reconsidered the decision dated 4 October 2012 but did not change it.  Nonetheless, in the reconsideration decision, the decision-maker submitted that as at the date of claim to ESA, it was the Department’s position that the claimant had actual capital of £23,386.16 and notional capital of £38,862.93.

9.	Subsequent to the oral hearing, the appeal tribunal issued a Decision Notice to the following effect:

‘The (claimant) applied for Employment and Support Allowance on 14.9.12.  On 28.9.09 she had transferred all her capital to her daughter … Therefore, on 14.9.12 she did not have capital in excess of £16000.  There is no evidence that (the claimant) deprived herself of capital to obtain Employment and Support Allowance 3 years after the disposal of capital.  The question of whether she knew of rules relating to capital is not relevant because of the time-lapse between disposal of capital and the claim for ESA.  (The claimant) is to be treated as having NIL capital at 14.9.12 for the purpose of claiming ESA.  The matter is referred back to the Department for the calculation of ESA payable.’

10.	On 27 August 2014 an application for leave to appeal to the Social Security Commissioners was received in the Appeals Service (TAS).  The application for leave to appeal was made by Mr McKendry of the Decision Making Services (‘DMS’) unit of the Department.

11.	On 16 September 2014 the application for leave to appeal was granted by the Legally Qualified Panel Member (LQPM) of the appeal tribunal.  In granting leave to appeal the LQPM identified, as a point of law arising:

‘Interpretation of Regulation 115(1) of the Employment and Support Allowance Regulations 2008.’

	Proceedings before the Social Security Commissioner

12.	On 8 October 2014 the appeal was received in the Office of the Social Security Commissioners.  A copy of the appeal was forwarded to the claimant and her representative, Mr O’Connor, of Larkin, O’Connor and Cassidy Solicitors, on 25 November 2014.  Mr O’Connor was invited to make representations on the appeal.  Written representations were received from Mr O’Connor on 13 February 2015 and were shared with Mr McKendry on 3 March 2015.  On 18 March 2015 further correspondence was received from Mr McKendry in which he submitted that he had no further comments to make.

13.	On 26 March 2015 I directed an oral hearing of the appeal.  The oral hearing took place on 6 May 2015.  The claimant was present and was represented by Mr Clark of Counsel, instructed by Mr O’Connor.  The Department was represented by Mr McKendry.  Gratitude is extended to both representatives for their detailed and constructive observations, comments and suggestions.

	Errors of law

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

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

“(i)	making perverse or irrational findings on a matter or matters that were material to the outcome (‘material matters’);
(ii)	failing to give reasons or any adequate reasons for findings on material matters;
(iii)	failing to take into account and/or resolve conflicts of fact or opinion on material matters;
(iv)	giving weight to immaterial matters;
(v)	making a material misdirection of law on any material matter;
(vi)	committing or permitting a procedural or other irregularity capable of making a material difference to the outcome or the fairness of proceedings; …

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

	What was the reasoning of the appeal tribunal?

16.	The LQPM has produced a detailed, thorough and methodical statement of reasons for her decision.  She identified three questions for the appeal tribunal:

(i)	Was (the claimant) not entitled to Income-Related Employment and Support Allowance because she had capital in excess of £16000 on 14 September 2012 (the date of claim)?

(ii)	Did (the claimant) deprive herself of capital for the purpose of securing her entitlement?

(iii)	 What knowledge did (the claimant) have of the capital rules?

17.	The LQPM began with an analysis of the question of actual capital.  In paragraph 15 of the decision the LQPM concluded:

‘… The actual capital of £23,386.00 is the balance of the monies between the inheritance received in 1999 by the appellant in the sum of £88,249.09 and the money transferred to her daughter on 28 September 2009, in the sum of £59,862.93.  This money is deemed by the Department to be still in the possession of the appellant, as she has provided no evidence as to its disposal.  The Tribunal heard evidence from the appellant and despite her protestations that she wanted nothing to do with the money, she gave evidence she used some of the money over the years for various purposes.  Despite the fact that there is no documentary evidence of its disposal, the Tribunal finds that on the balance of probabilities, over a 10 year period (or a 13 year period if the date of application for ESA is taken into account), that it is likely and reasonable to assume that the appellant disposed of £23,386.00 on the expenditure that she outlined to the Tribunal.  Therefore the Tribunal is satisfied that (the claimant) did not hold actual capital at the time of her application for Employment and Support Allowance on 14 September 2012.’

18.	In paragraphs 16 to 22 of her decision, the LQPM addressed the question of notional capital:

‘16.	This leads onto a consideration of ‘notional capital’, which is deemed by the Department to amount to a sum of £38,612.08 being the difference in the amount benefit [sic] that she would have been deemed to have been paid from 28.09.2009 to 14.09.12, deducted from the amount given to her daughter in 2009.  No issue was taken with the calculation of the figures undertaken by the Department.  The Tribunal then considered the wording of Regulation 115 of the Employment and Support Allowance regulations 2008, which defines what is to be considered ‘notional capital’ and all the exceptions to that rule.’

17.	Regulation 115(1) states that:

18.	A claimant is to be treated as possessing capital of which the claimant has deprived himself for the purpose of securing entitlement to employment and support allowance or increasing the amount of that allowance, or for the purpose of securing entitlement to or increasing the amount of, income support or jobseeker’s allowance except:- (Tribunal’s highlights)

19.	The decision of the Department against which the appellant is appealing, is that (the claimant) is not entitled to income-related Employment and Support allowance from 14 September 2012 because she capital in excess of £16,000.  As set out above the Department calculated the figures in relation to that capital, being both actual and notional.  The Tribunal has already set out at paragraph 15 above, the decision relating to actual capital.

20.	With regard to notional capital, the Tribunal agrees that in the normal course of matters, it would be reasonable to assume that (the claimant) had notional capital of £38,612.08, had there been evidence that she had deprived herself of capital in or about the 14th September 2012 or within a reasonable period of time prior to that date, for the purposes of securing entitlement to income-related employment and support allowance.  The disposal of capital had occurred in September 2009 about four or five days after (the claimant) had applied for income support.  The tribunal accepts that on the balance of probabilities, the disposal of the capital was for the purposes of securing entitlement to income support and that matter has been litigated elsewhere and at another time and is not for the Tribunal to consider here.

21.	On the 14th September 2012, when (the claimant) applied for income-related employment and support allowance, she had already disposed of all her actual capital some three years earlier.  It could not be said she disposed of actual capital to her daughter on the 28th September 2009, with the intention of claiming income related employment and support allowance on the 14th September 2012.  The passage of time is too great for that to be a proximate event.

22.	Although the appellant may very well have held notional capital in the sum of £38,612.08 as at 14 September 2012, the concept of notional capital is based on the requirement that the claimant had disposed of her actual capital for the ‘purpose of securing entitlement to employment and support allowance’ as set out in Regulation 115(1) above and there is no evidence that the capital was disposed of for this purpose.

23.	Accordingly, the Tribunal finds that (the claimant) did not have capital in excess of £16,000 at the time of her application for income-related Employment and Support Allowance on 14 September 2012 and therefore the decision of the Department of 4 October 2012 was incorrect and the Appeal is allowed.’

	The submissions of the parties

19.	In his Case Summary, prepared for the oral hearing of the appeal, Mr McKendry submitted that the appeal tribunal had erred in not considering regulation 115(1) of the Employment and Support Allowance Regulations (Northern Ireland) 2008 (‘the 2008 Regulations’), as amended, in its entirety.  He made reference to a corresponding regulation (113) in the Jobseeker’s Allowance Regulations (Northern Ireland) 1996 (‘the 1996 Regulations’), as amended.  He submitted:

‘It is clearly evident from the tribunal’s statement of reasons that it accepted that (the claimant) had deprived herself of capital for the purposes of securing entitlement to IS (back in September 2009).  The tribunal, however further considered that as the transaction to her daughter happened in November 2009 the passage of time elapsed was too great for it to be a proximate event in relation to her claim to ESA(IR).

I would submit that, given that there is clear differentiation in the legislation quoted above that the tribunal should have considered ESA regulation 115(1) in much more detail.  There is a clear caveat within the ESA regulation that does not exist within the corresponding IS and JSA regulations, in that it considers both IS and JSA in addition to ESA whereas the corresponding legislation outlined above (namely regulation 51(1) and 113(1) of the IS and JSA regulations) clearly does not.’

20.	Mr McKendry also made reference to a passage from Volume 1 of Sweet and Maxwell’s Social Security Legislation.  In the 2015/16 series the passage is to be found in paragraph 9.276.  It is an annotation to regulation 115 of the Employment and Support Allowance Regulations 2008 in Great Britain and reads as follows:

‘Note that under para.(1) if a person has deprived himself of capital he will be caught by this rule if the purpose of this deprivation was to secure entitlement to or increase the amount of ESA, or income support, or JSA.  This avoids the question that might otherwise have arisen on a claimant transferring from income support (or JSA) to ESA whether a deprivation which had only been for the purposes of income support (or JSA) could be caught by para.(1).’

21.	During the course of the oral hearing, Mr McKendry added to the written submissions which he had made in the Case Summary.

22.	Mr Clark submitted that the appeal tribunal did apply regulation 115(1) correctly.  Its decision was to draw a distinction between the applications.  This was not a case where there was a transfer of benefits.  He submitted that the paragraph quoted by Mr McKendry from Volume 1 of Sweet and Maxwell’s Social Security Legislation dealt with the situation where there had been a deprivation of capital to gain an entitlement to one social security benefit followed by a transfer to another social security benefit.

23.	Mr Clark accepted that the claimant had been entitled to and was in receipt of IS.  That had stopped in December 2010.  The application to ESA had been in December 2012.  Accordingly, and given the gap in time it could not be said that the claimant had deprived herself of capital in 2010 for the purpose of gaining entitlement in 2012.  All of this was properly addressed by the appeal tribunal.

24.	Mr Clark referred to paragraph 845 of Volume 52 of the ‘Decision Maker’s Guide’ prepared by the Department where it was indicated that:

‘The decision maker should consider the date claimants or partners deprived themselves of capital.  Such a fact is more relevant if deprivation is near to the date of the claim or the date the claimant’s circumstances change.’

25.	Mr Clark submitted that the decision in R(SB) 9/91 was also supportive of that principle.

The relevant legislative provisions

26.	Section 1(1) and paragraph 6(1)(b) of Part 2 of Schedule 1 to the Welfare Reform Act (Northern Ireland) 2007 provide, as one of the conditions of entitlement to income-related ESA, that the claimant does not have capital which, or a prescribed part of which, exceeds the prescribed amount.

	Regulation 110 of the 2008 Regulations provides:

‘110. For the purposes of paragraph 6(1)(b) of Schedule 1 to the Act as it applies to an income related allowance (no entitlement to benefit if capital exceeds prescribed amount), the prescribed amount is £16,000.’

	Regulation 111(1) of the 2008 Regulations provides:

‘111.—(1) For the purposes of sections 1(2) and 4 of, and Part 2 of Schedule 1 to, the Act as it applies to an income-related allowance, the capital of a claimant to be taken into account is, subject to paragraph (2), to be the whole of the claimant’s capital calculated in accordance with this Part and any income treated as capital under regulation 112 (income treated as capital).’

	Regulation 11(2) and Schedule 9 provide for certain capital to be disregarded from the calculation of capital but none of those disregards apply in the present case.
Regulation 115(1) of the 2008 Regulations provides:

‘115(1) A claimant is to be treated as possessing capital of which the claimant has deprived himself for the purpose of securing entitlement to an employment and support allowance or increasing the amount of that allowance, or for the purpose of securing entitlement to, or increasing the amount of, income support or a jobseeker’s allowance …’

27.	There are exceptions to regulation 115(1) providing for certain capital to be disregarded as notional capital.  None of those disregards apply in the instant case.

28.	For the moment, it is also appropriate to note the provisions of Article 17(1) of the Social Security (Northern Ireland) Order 1998, as amended (‘the 1998 Order).  It provides:

‘Subject to the provisions of this Chapter, any decision made in accordance with the foregoing provisions of this Chapter shall be final.’

	Analysis

29.	ESA is a relatively new social security benefit.  As was noted above, it was introduced through a primary and secondary legislative scheme in 2007 and 2008.  ‘Notional capital’ rules are not new, however.  They have been part of the ‘capital’ conditions of entitlement to means-tested benefits, most notably income support (IS) and jobseeker’s allowance (JSA) for a considerable period of time.

30.	Section 130(1) of the Social Security Contributions and Benefits (Northern Ireland) Act 1992 provides:

‘130(1) No person shall be entitled to an income-related benefit if his capital or a prescribed part of it exceeds the prescribed amount.’

IS is an ‘income-related benefit’.

31.	Regulation 45(1) of the Income Support (General) Regulations (Northern Ireland) (‘the 1987 Regulations’) provides:

‘45(1) For the purposes of section 130(1) of the Contributions and Benefits Act as it applies to income support (no entitlement to benefit if capital exceeds prescribed amount), the prescribed amount is £16,000.’

32.	Regulation 46(1) of the 1987 Regulations provides:

‘46(1) For the purposes of Part III of the Order as it applies to income support, the capital of a claimant to be taken into account shall … be the whole of his capital calculated in accordance with this Part.’

33.	Regulation 51(1) provides:

‘51(1) A claimant shall be treated as possessing capital of which he has deprived himself for the purpose of securing entitlement to income support or increasing the amount of that benefit …’

34.	Those ‘capital’ and ‘notional capital’ provisions have been in the format set out above since the introduction of the benefit, apart, that is, from the capital prescribed amount in regulation 45(1).

35.	The ‘notional capital’ rules as they apply to the legislative scheme relating to Jobseeker’s Allowance (JSA) are different to those which apply to IS.  There are two types of JSA – contribution-based and income-based.  Article 15(1) of the Jobseekers (Northern Ireland) Order 1995 (‘the 1995 Order’) provides:

‘15 (1) No person shall be entitled to an income-based jobseeker’s allowance if his capital, or a prescribed part of it, exceeds the prescribed amount.’

36.	Regulation 107 of the 1996 Regulations provides:

‘107 For the purposes of Article 15(1) and (2A) of the Order (no entitlement to an income-based jobseeker’s allowance if capital exceeds a prescribed amount), the prescribed amount is £16,000.’

37.	Regulation 108(1) of the 1996 Regulations provides:

‘108 (1) Subject to paragraph (2), the capital of a claimant to be taken into account shall be the whole of his capital calculated in accordance with this Part and any income treated as capital under regulation 110.’

38.	Finally, regulation 113(1) provides:

‘113 (1) A claimant shall be treated as possessing capital of which he has deprived himself for the purpose of securing entitlement to a jobseeker’s allowance or increasing the amount of that allowance, or for the purpose of securing entitlement to or increasing the amount of income support …’

39.	The highlighted part of regulation 113(1) represents a difference between the notional capital rule for JSA and that for IS.  As was noted above, the IS rule is relatively uncomplicated treating as notional capital that capital of which a claimant has deprived himself for the purpose of securing entitlement to IS only.  The JSA rule repeats the basic rule that deprivation of capital for the purpose of securing entitlement to JSA will be treated as notional capital but adds that capital of which a claimant has deprived himself for the purpose of securing entitlement to IS will also be treated as notional capital.

40.	The ESA notional capital rule goes one stage further.  As was noted above, regulation 115(1) of the 2008 Regulations repeats the JSA and IS basic rules that deprivation of capital for the purpose of securing entitlement to ESA will be treated as notional capital but adds that capital of which a claimant has deprived himself for the purpose of securing entitlement to either IS and JSA will also be treated as notional capital.

41.	How should regulation 115(1) be interpreted?  In my view, the wording of the provision is clear and unproblematic.  It means what it says.  One of the conditions of entitlement to income-related ESA is that the claimant does not have capital which exceeds the prescribed amount of £16,000.  Capital for these purposes includes notional capital.  In turn, notional capital means capital of which a claimant has deprived himself for the purposes of securing entitlement to ESA, IS or JSA.  The wording of regulation 115(1) does not offer any discretion.  It provides that a claimant is to be treated as possessing capital of which he has deprived himself for the purposes of securing entitlement to ESA, IS or JSA.  An adjudicating authority, whether that is a decision-maker of the Department, or an appeal tribunal, in determining whether a claimant satisfies the conditions of entitlement to income-related ESA, and more particularly, the capital rules, including the notional capital rule, is required to ascertain whether the claimant has deprived himself of capital for the purpose of securing entitlement to ESA, IS or JSA.

42.	In the instant case, the decision-maker, on 14 September 2012, decided that the claimant was not entitled to income-related ESA.  The stated basis for the decision was that the claimant had capital in excess of £16,000.  At that stage it was not clear whether the capital, which exceeded the capital limit, was classified by the decision-maker as actual or notional capital.  I have noted, however, that as part of the reconsideration process following the issue of the decision of 14 September 2012, an inter-Departmental memorandum was issued on 14 November 2012.  A copy of that memorandum was attached to the original appeal submission as Tab No 7.  In this memorandum an office of the Department made the statement that:

‘… customer has been found to have actual capital of £83,249.09 on 25/08/10 from a previous Income Support claim.’

43.	In the first reconsideration decision, dated 18 October 2013, the decision-maker has provided the following reasons for his decision:

‘(The claimant) inherited in excess of £16,000 which she then gave away to her daughter.  She was under no legal obligation to do so and she is therefore treated as still being in possession of capital in excess of £16,000.’

44.	It is clear, therefore, that the decision-maker regarded the capital which exceeded the capital amount as notional capital.  What the initial or reconsideration decisions do not specify, however, is the precise legislative basis on which the notional capital accumulated.  What I mean is that the decision-makers have not specified whether the notional capital accrued as a result of deprivation for the purpose of securing entitlement to IS, JSA or ESA.

45.	Following the earlier adjournments of the appeal before the appeal tribunal a reconsideration decision was issued on 2 May 2014.  In this decision, the decision-maker decided that the claim to ESA should be disallowed on the basis that the claimant had actual capital of £23,386.16 and notional capital of £59,862.93.  The finding of actual capital in excess of the capital limit for entitlement to income-related ESA is sufficient to base the reconsideration decision to disallow.  Once again, however, no specific basis, in terms of regulation 115(1), is given for the decision on notional capital.

46.	Where did the appeal tribunal go wrong?

47.	As was noted above, in paragraph 15 of the statement of reasons for its decision the appeal tribunal concluded that at the date of the application for ESA the claimant did not have any actual capital.  As was also noted above, the Department, at the oral hearing of the appeal, had submitted that the claimant had actual capital in the sum of £23,386.16.  This figure had been arrived at by deducting the sum of £59,862.93, which the claimant had given to her daughter from the sum of £88,249.09, the sum which the claimant had received by way of inheritance.  After assessing all of the evidence which was before it, the appeal tribunal concluded, on the balance of probabilities, that the sum of £23,386.16, submitted by the Department to be actual capital in possession of the claimant at the date of claim, had been dissipated by the claimant over a ten year period.

48.	The appeal tribunal did not go on to make findings as to the motive for the disposal of that capital sum and, more particularly, whether the claimant had deprived herself of that capital sum for the specific purpose of securing entitlement to IS.  In such circumstances what had originally been categorised as actual capital could have become notional capital.  The appeal tribunal’s phrase in paragraph 15 that it is ‘likely and reasonable’ to assume that the claimant disposed of the capital on the expenditure specified by her, suggest that the appeal tribunal accepted the dissipation of the capital amount as being reasonable in the circumstances.

49.	The appeal tribunal was correct to remind itself that in considering whether the claimant had notional capital for the purposes of her claim to ESA then the relevant rule was to be found in regulation 115(1) of the 2008 Regulations.  The appeal tribunal set out the rule in its correct form in paragraph 18 of the statement of reasons for its decision.

50.	In paragraph 20 the appeal tribunal found, as a fact, that the claimant had deprived herself of capital in the sum of £59,862.93 in September 2009 and then arrived at a significant conclusion that, ‘… on the balance of probabilities, the disposal of the capital was for the purposes of securing entitlement to income support.’  Thereafter, there are two crucial errors in the appeal tribunal’s reasoning in paragraph 20.  The first is contained in the following statement:

‘With regard to notional capital, the Tribunal agrees that in the normal course of matters, it would reasonable to assume that (the claimant) had notional capital of £38,612.08, had there been evidence that she had deprived herself of capital in or about the 14th September 2012 or within a reasonable period of time prior to that date, for the purposes of securing entitlement to income-related employment and support allowance.’

51.	The emphasis in this sentence is my own.  The appeal tribunal’s error is that it has limited consideration of the deprivation of capital to the sole purpose of securing entitlement to ESA.  Despite having set out the correct wording of regulation 115(1) in paragraph 18 of its statement of reasons, the appeal tribunal has forgotten, in its analysis, that deprivation, for the purposes of the rule, can also be for the purposes of securing entitlement to IS (or, as the case may be, JSA).

52.	The second error in paragraph 20 is in the appeal tribunal’s statement that despite its conclusion that the deprivation of capital in September 2009 was, on the balance of probabilities, for the purposes of securing entitlement to IS, that the ‘… matter has been litigated elsewhere and at another time and is not for the Tribunal to consider here.’ Once again, the appeal tribunal has, to a certain extent, misdirected itself. As was noted above, Article 17(1) of the 1998 Order provides that decisions made under Chapter II of Part II of the 1998 Order are final. Decisions under Chapter II of Part II include decisions of the Department and of an appeal tribunal. Nonetheless, if, as the appeal submission prepared for the appeal tribunal suggested, and as the appeal tribunal itself unequivocally concluded, there was a deprivation of capital for the purpose of securing entitlement to IS then that had the potential to be relevant, under regulation 115(1) of the 2008 Regulations, for entitlement to ESA, under the claimant’s claim to that benefit.

53.	Finally, the appeal tribunal has repeated a fundamental error in paragraph 22 of its decision.  In that paragraph it concluded:

‘Although the appellant may very well have held notional capital in the sum of £38,612.08 as at 14 September 2012, the concept of notional capital is based on the requirement that the claimant had disposed of her actual capital for the ‘purpose of securing entitlement to employment and support allowance’ as set out in Regulation 115(1) above and there is no evidence that the capital was disposed of for this purpose.’

54.	On this occasion, the emphasis is that of the appeal tribunal.  The appeal tribunal has misdirected itself as to the scope of regulation 115(1) and has limited consideration of the deprivation of capital to the sole purpose of securing entitlement to ESA.  The appeal tribunal made an unequivocal finding that the claimant had deprived herself of capital for the purpose of securing entitlement to IS.  It then considered that this was a finding that was not relevant to its deliberation as to whether regulation 115(1) applied.  On the contrary, it had the potential to be relevant and the appeal tribunal’s decision to ignore that potential relevance, together with its misdirection as to the scope of regulation 115(1) renders its decision as being in error of law.

55.	Where does this analysis of regulation 115(1) leave the claimant in the instant case?  Is she, for evermore, in making a claim to a social security benefit such as ESA, to be ‘fixed’ with a deprivation of capital for the purpose of securing entitlement to an unrelated social security benefit made several years ago?

56.	It is instructive to consider how the ‘notional capital’ rules as they apply to IS have been interpreted by the appellate authorities, most notably the Social Security Commissioners and the Upper Tribunal, in the context relevant to the instant appeal.

57.	In CIS/2540/2004 the facts were that the appellant had been in receipt of IS from 1998.  In October 2001 she became entitled to the sum of £58,993.96 in respect of the net proceeds of the sale of her house, but on her instructions the cheque for that sum was made payable to her son.  In 19 December 2001 a decision was made terminating her entitlement to income support on that date, on the ground that she had deprived herself of the net proceeds of sale for the purpose of securing entitlement to income support and therefore was to be treated under reg. 51 of the Income Support (General) Regulations 1987 as possessing notional capital.  The appellant appealed to an appeal tribunal which, however, dismissed the appeal in June 2002.

58.	In April 2003 the appellant made a new claim for minimum income guarantee (in essence IS again).  On 14 May 2003 a decision was made disallowing the claim on the ground that, as the appellant had been held to have notional capital of £58,993.96 as at October 2001, she still (after performing a diminishing notional capital calculation as required by reg. 51A of the 1987 Regulations) had notional capital of £57,524.96.

59.	The appellant appealed, once again, to an appeal tribunal.  The appeal tribunal dismissed the appeal, holding that, by virtue of the doctrine of issue estoppel, it was bound by the decision of the previous appeal tribunal that the appellant had deprived herself of the proceeds of sale for the purpose of securing entitlement to IS.

60.	The appellant appealed further to the Social Security Commissioner.  Mr Commissioner Turnbull began by setting out section 17 of the Social Security Act 1998, which provides, in terms parallel to that of Article 17(1) of 1998 Order, as follows:

‘(1)	Subject to the provisions of this Chapter, any decision made in accordance with the foregoing provisions of this Chapter shall be final; and subject to the provisions of any regulations under section 11 above, any decision made in accordance with those regulations shall be final.

(2)	If and to the extent that regulations so provide, any finding of fact or other determination embodied in or necessary to such a decision, or on which such a decision is based, shall be conclusive for the purpose of – 

	(a)	further such decisions;

	(b)	decisions made under the Child Support Act; and

	(c)	decisions made under the Vaccine Damage Payments Act.‘

61.	The Commissioner was of the view that section 17 drew a distinction between the decision itself, which by section 17(1) is made final, and ‘any finding of fact or other determination embodied in or necessary to such a decision’, which by section 17(2) is conclusive for the purpose of further decisions only if regulations so provide.

62.	The Commissioner noted that the doctrine of res judicata, as it applied in ordinary civil litigation was ‘substantially modified’ in relation to decisions of appeal tribunals.  The words ‘subject to the provisions of this Chapter’, in section 17(1) recognises the possibility of superseding an appeal tribunal’s decision for ignorance of or mistake as to a material fact under regulation 6(2)(c) of the Social Security and Child Support (Decisions and Appeals) Regulations 1999.  Further he noted the comments of Mr Commissioner Howell in paragraph 17 of his decision in R(I) 5/04, when he stated:

‘As section 17(2) shows, the normal principle of “issue estoppel” that applies in civil litigation to prevent parties re-litigating factual issues already judicially decided in proceedings between them is of no application to the social security decision and appeal machinery unless there is some specific regulation that makes it so.’

63.	The Commissioner also made reference to the decision of Mr Commissioner Jacobs in CIS/1330/2002.  In that case the appellant’s award of IS was superseded with effect from a date about a year earlier on the ground that she had had capital in excess of £8,000.  This was an entitlement decision.  Her appeal against the entitlement decision failed.  She also appealed against a decision that there had been an overpayment of IS which was recoverable from her.  This was an overpayment decision.  The appeal tribunal decided that the findings of fact made by the earlier appeal tribunal deciding the appeal against the entitlement decision were conclusive of the issue raised by the appeal and binding on it.  Mr Commissioner Jacobs found that the appeal tribunal had erred in law in deciding that the issue raised by the appellant had been dealt with by the appeal tribunal deciding the appeal against the entitlement decision and could not be re-opened.

64.	Mr Commissioner Jacobs also noted the decision of Mr Commissioner Sanders in CIS/1263/1997.  In that case, an adjudication officer (decision-maker of the Department) had decided that the appellant was no longer entitled to IS, because his capital exceeded the threshold for an award.  An adjudication officer had also given a separate recoverable overpayment decision.  The Commissioner was concerned with an appeal against the latter decision.  The appellant argued that he did not have the capital in excess of the threshold.  The tribunal decided that it was bound by the earlier decision.  Mr Commissioner Jacobs noted, at paragraph 17 of his decision, that:

‘The Commissioner held that that was wrong.  The first decision was final on the claimant’s entitlement, but the recoverability of the resulting overpayment was a separate issue.  The tribunal was entitled to make its own findings of fact on that issue, even if that resulted in inconsistent findings.’

65.	In connection with his own case, Mr Commissioner Jacobs held, at paragraph 19:

‘… section 17 does not expressly provide that a finding of fact in one decision is not conclusive for further decisions.  However, that remains the law.  I have come to that conclusion for two reasons.  First, the reasoning of Mr Commissioner Sanders was derived from general principle about finality of findings.  He remarked (paragraph 4) that it was ‘only to be expected’ that different findings could be made in decisions dealing with different issues.  Second, section 17(2) presupposes that findings of fact in ‘further such decisions’ are not conclusive.  Otherwise, regulations would not be needed to make them so.’

66.	Returning to the analysis of Mr Commissioner Turnbull in CIS/2540/2004, he found, at paragraphs 14 to 16:

‘14.	In the present case the “decision” which (subject to the provisions of Chapter II of Part I of the Act) was made final by s.17(1) was the decision, made on 19 December 2001 and upheld by the appeal tribunal on 21 June 2002, that the original decision awarding income support should be superseded with effect from 19 December 2001.  The effect of s.17(1) was therefore merely that, once the time for seeking leave to appeal to a Commissioner against that appeal tribunal’s decision had expired, the Claimant could not seek to have it changed or altered, save by an application for supersession (there being no provision in Part II for revision of an appeal tribunal’s decision).

15.	However, the decision maker’s finding, upheld by the appeal tribunal, that the Claimant had deprived herself of the proceeds of sale for the purpose of securing entitlement to income support was not a “decision” which was made “final”, but a finding of fact necessary to the decision superseding the award of income support.  By s.17(2) that finding was therefore only conclusive for the purpose of further decisions if and to the extent that regulations so provide, and there are no regulations providing for any such conclusive effect in the present case

16.	Put perhaps more simply, the 2002 appeal tribunal upheld the decision that the Claimant was not from 19 December 2001 entitled to income support.  In making her fresh claim on 1 April 2003 the Claimant was not seeking, in contravention of s.17(1), to change that decision by a means not provided for in the 1998 Act and the regulations made thereunder.  In order for her fresh claim to succeed she had to persuade a decision maker or (on appeal) an appeal tribunal to make a different finding from that made by the 2002 appeal tribunal on the issue of deprivation of capital, but section 17(2) (and the absence of any relevant regulation made thereunder) in effect permits her to seek to do so.’

67.	The Commissioner addressed, in paragraph 17, what might be perceived to be an anomaly arising:

‘This is a result which might be thought surprising.  A claimant who is treated as having substantial notional capital under reg. 51 will not be entitled to income support until such time as, by application of the diminishing notional capital provisions in reg. 51A, the notional capital is reduced to below the relevant limit.  The finding that a claimant has notional capital is therefore one which, by its very nature, will have continuing effect.  In those circumstances it might be thought (as the Tribunal thought in this case) that a decision of an appeal tribunal on the notional capital issue should not be capable of being relitigated if a fresh claim is made.  However, I see no escape from the conclusion that s.17(2) does have the effect of permitting it to be relitigated.  If that were thought to be an undesirable result, the answer would seem to lie in the making of regulations under s.17(2).’

68.	The principles emerging from those cases might be applied to the instant case in the following manner.  Firstly, the application of the diminishing notional capital rule will result, eventually, in the reduction of any notional capital to below the relevant capital limit.  Accordingly, the claimant will not be ‘fixed’ with a deprivation of capital forever.

69.	Secondly, and to paraphrase the wording of Mr Commissioner Turnbull in paragraph 16 of his decision, the claimant, when she made her claim to ESA, in September 2012, was not seeking to challenge, in contravention of Article 17(1) of the 1998 Order, any earlier decisions on claims to IS or ESA which had foundered on the basis that she had actual, or more accurately, notional capital in excess of the capital limit for entitlement to ESA.  She was not, in addition, challenging the basis of any prior decision that the notional capital had accrued as a result of deprivation for the purpose of securing entitlement to benefit.  Rather, and as the burden of proof on a fresh claim was on her, she had to persuade a decision-maker that she had no actual or notional capital and, on the question of notional capital, that she had not deprived herself of capital for the purpose of securing entitlement to IS, JSA or ESA.  She was wholly permitted to relitigate the notional capital issue on a fresh claim.  Article 17(2), or more particularly, the absence of regulations made under Article 17(2), allows her to do so.

70.	As it turned out, the claimant was not able to persuade the decision-maker that she did not fall foul of the capital rules and, more particularly, the notional capital rule.  The decision-maker’s decision was based on a finding that the claimant had capital in excess of the relevant capital limit.  As was noted above, however, the reasoning of the decision-makers (initial and on first and second reconsideration) is difficult to determine.  Nonetheless, it is likely that the Department’s decision is based, in large part, that the claimant had notional capital in excess of the relevant capital limit, and that the accrual of the notional capital had resulted from a deprivation of capital for the purpose of securing entitlement to benefit (whether that was IS, JSA, or ESA).

71.	As will be noted in more detail below, having found that the decision of the appeal tribunal is in error of law my own decision is to refer the case to another appeal tribunal for re-determination by way of oral hearing.  At the fresh oral hearing of the appeal, the claimant will have the opportunity to challenge the legal and evidential basis for the decision to refuse her entitlement to ESA.  I have set out below directions to the parties in connection with the re-determination of the appeal.  One of those directions is for the Department to prepare a further appeal submission which, inter alia, sets out the legal and evidential basis for the decision refusing entitlement to ESA. It will be for the Department to outline what is the legal and evidential basis and it is not for me to second-guess what the response might be.  If, however, the Department continues to submit that the legal and evidential basis includes a determination that the claimant continues to possess notional capital and that the origin for the accrual of the notional capital is deprivation by the claimant for the purpose of securing entitlement to benefit (IS, JSA or ESA) then the claimant is entitled to challenge that determination.

	Disposal

72.	Having held that the decision of the appeal tribunal is in error of law I have to consider how to dispose of the appeal.  Article 15(8) mandates that the decision of the appeal should be set aside.  Thereafter, there are two possible disposals.  The first of these involves giving the decision which the appeal tribunal should have given if I can do so without making fresh or further findings of fact or, if I consider it expedient, to make such findings and to give a decision as I consider appropriate in light of them.  In the event that I cannot give the decision which the appeal tribunal should have given the mandated disposal is to refer the case to a tribunal with directions for its determination.

73.	I have given serious consideration to giving the decision which the appeal tribunal should have given.  What prompted that consideration was the clear and unequivocal finding by the appeal tribunal that the claimant had deprived herself of capital in excess of the relevant capital limit for the purpose of securing entitlement to IS.  As was noted above, the appeal tribunal did not apply regulation 115(1) of the 2008 Regulations in an accurate manner to that finding.

74.	I have determined, however, that the case should be referred to a tribunal for re-determination.  Even though the appeal tribunal did address the issue of the deprivation of capital in the context of securing entitlement to IS, I am not wholly convinced that this was done so in the context of the potential application of regulation 115(1).  I am satisfied that the appeal tribunal misdirected itself as to the scope and effect of regulation 115(1).  A proper and accurate application of the regulation would have included an opportunity for the claimant and her representative to address the deprivation of capital for the purpose of securing entitlement to IS in the context of the claim to ESA.  That vital aspect of the appeal tribunal’s reasoning was missing and the process of arriving at its conclusions on the deprivation of capital in the proper context may also have been deficient.

75.	As was noted above, I cannot also be certain, from the statement of reasons for the appeal tribunal’s decision, that the appeal tribunal, having determined that the actual capital had been dissipated over a ten to thirteen year period, did not go on to make findings as to the motive for the disposal of that capital sum and, more particularly, whether the claimant had deprived herself of that capital sum for the specific purpose of securing entitlement to IS.  In such circumstances what had originally been categorised as actual capital could have become notional capital.

76.	Finally, it is clear that even if there was to be a finding that that the claimant, in connection with her claim to ESA, had notional capital, there are further calculations to be made as to the amount of that notional capital, taking into account a diminution in the capital amount through the application of the diminishing notional capital rule.

	Two additional issues arising

77.	In the Case Summary prepared on behalf of the claimant in advance of the oral hearing of the appeal before me, Mr O’Connor made the following submission:

‘It is submitted that as the learned Judge in respect of the Confiscation Proceedings had already dealt with the same issue – namely whether (the claimant) deliberately deprived herself of capital to obtain the benefits in question – that the issue became res judicata at that point, and any further litigation should fail.’

78.	In advance of the oral hearing of the appeal I provided the parties with copies of my decision in RS v Department for Social Development (IS) ([2012] NIComm304, (C5/12-13(IS)).  In that decision, at paragraphs 16 to 22, I set out the principles on the effect of additional proceedings in courts on the social security benefit decision-making process.  I referred to my earlier decision in SG v Department for Social Development (IS) ([2010] NICom 17, (C1/09-10(IS)).  In light of those decisions Mr Clark did not pursue the submission in connection with the effect of the other court proceedings.

79.	As was noted above, Mr McKendry made reference to paragraph 9.276 of Volume 1 of Sweet and Maxwell’s Social Security Legislation 2015/2016.  The passage is an annotation to regulation 115 of the Employment and Support Allowance Regulations 2008 in Great Britain.  Sweet and Maxwell’s Social Security Legislation is the most authoritative text on the meaning and context of an exceptionally complex social security legislative scheme.  I find it difficult, however, to place the explanation and guidance in the cited passage in the context of the relevant regulation.  I cannot, with respect, understand how the example which has been given as to how regulation 115(1) might operate in practice would work.  If there had been a deprivation of capital would that not have led to a denial of entitlement to the social security benefit (IS or JSA) from where the ‘transfer’ is taking place?

	Directions

(i)	The case is referred to a differently constituted appeal tribunal for re-determination.

(ii)	The appeal is to be listed as an oral hearing.

(iii)	In advance of the appeal tribunal hearing, the Department is to prepare a new appeal submission.

(iv)	The appeal submission should set out the legal and evidential basis of the decision which denies the claimant entitlement to ESA.

(v)	If the legal basis for the decision relies on regulation 115(1) of the 2008 Regulations then the appeal submission must be specific as to how that regulations applies.

(vi)	If the legal and evidential basis concerns issues of actual and/or notional capital then the submission should set out in a concise and coherent manner the basis on which figures of actual or notional capital have been arrived at and, in the case of reliance on notional capital, how the figures have been reduced taking into account the diminishing notional capital rule.

(vii)	It will be for the claimant and her representative, to make submissions, and adduce evidence in support of those submissions, on all of the issues relevant to the appeal.

(viii)	It will be for the appeal tribunal to consider the submissions made by the parties to the proceedings on these issues, and any evidence adduced in support of them, and then to make its determination, in light of all that is before it.

(signed)  K Mullan

Chief Commissioner

13 November 2015