KM -v- Department for Communities (PC) [2017] NICom 59

Decision No:  C1/17-18(PC)

SOCIAL SECURITY ADMINISTRATION (NORTHERN IRELAND) ACT 1992

SOCIAL SECURITY (NORTHERN IRELAND) ORDER 1998

PENSIONS CREDIT

Appeal to a Social Security Commissioner
on a question of law from a Tribunal's decision
dated 19 June 2015

DECISION OF THE SOCIAL SECURITY COMMISSIONER

1.	In this decision I make reference to the ‘appointee’ and the ‘claimant’.  Regrettably the claimant passed away during the course of the proceedings before me and I extend my condolences to her family.  The appointee is the daughter of the late claimant and acts on her behalf in these proceedings.

2.	In summary, the claimant had been entitled to State Pension Credit (PC) for a period of time but had that entitlement removed by a decision of the Department.  The appointee challenged the decision of the Department by appealing to an appeal tribunal but was unsuccessful in that appeal.  The appointee made an application for leave to appeal against the decision of the appeal tribunal.  In an earlier determination I granted leave to appeal.

3.	My formal decision is that the decision of the appeal tribunal dated 19 June 2015 is in error of law.  The error of law identified will be explained in more detail below.  Pursuant to the powers conferred on me by Article 15(8) of the Social Security (Northern Ireland) Order 1998, I set aside the decision appealed against.

4.	For further reasons set out below, I am unable to exercise the power conferred on me by Article 15(8)(a) of the Social Security (Northern Ireland) Order 1998 to give the decision which the appeal tribunal should have given.  This is because there is detailed evidence relevant to the issues arising in the appeal to which I have not had access.  Further, 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.

5.	The decision to refer the case to another appeal tribunal may come as a disappointment to the appointee.  In correspondence to the office of the Social Security Commissioners, the appointee has indicated that following the untimely death of her late mother the family was anxious to bring these proceedings to a close and urged that I should make the decision that the appeal tribunal ought to have made.  I am of the view that the proper fact-finding body in this instance is an appeal tribunal with appropriate expertise.

6.	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.

7.	It is imperative that the appointee notes that while the decision of the appeal tribunal has been set aside, the issue of the entitlement of her late mother remains to be determined by another appeal tribunal.  In accordance with the guidance set out below, the newly constituted appeal tribunal will be undertaking its own determination of the legal and factual issues which arise in the appeal.

	Background

8.	The claimant had been in receipt of PC.  The Department undertook a series of investigations prompted by the disclosure that the claimant had been admitted to a care or nursing home.

9.	On 20 May 2014 a decision maker determined that the claimant should be treated as having capital of £27000 as at 8 October 2012 and £25200 as at 7 October 2013.

10.	On 20 May 2014 the decision which had made an award of PC to the claimant was superseded.  The basis of the supersession was stated to be that a relevant change of circumstances had occurred since the date of the decision making the award.  The relevant change of circumstances was stated to be that the claimant had been admitted on a permanent basis to a nursing home.  The supersession decision was stated to take effect from 8 October 2012.

11.	In the appeal submission which had been prepared for the appeal tribunal hearing it was noted that on 20 May 2014 a decision maker:

‘… noted that (the claimant) had capital of £6,463.22 in the bank.  She (the decision maker) decided that the capital value of her previous home along with capital held in the bank should be taken into account from 08/10/12.  As a result, (the claimant) is not entitled to Pension Credit from 08/10/2012.’

12.	It does not appear that there was a formal decision to that effect attached to the appeal submission.  What was attached to the appeal submission was correspondence dated 20 May 2014 to the claimant advising her that she was ‘no longer’ entitled to PC.

13.	On 2 June 2014 a notice of appeal was received in the Department.  In the notice of appeal the appointee identified the date of the letter notifying the decision as 20 May 2014.

14.	On 7 July 2014 the ‘decision’ dated 20 May 2014 was reconsidered but was not changed.

15.	The appeal was first listed for hearing on 22 December 2014.  The appointee was present.  There was no Departmental Presenting Officer present.  The appeal was adjourned in order that a Presenting Officer could attend.

16.	The appeal was relisted for hearing on 2 February 2015.  On 26 January 2015 e-mail correspondence was received in the Appeals Service (TAS) from the appointee in which she requested a postponement of the hearing in order that her representative could attend.  On 27 January 2015 the application for a postponement was granted by the Legally Qualified Panel Member (LQPM).

17.	The appeal was relisted for hearing on 1 May 2015.  On 13 April 2015 a form was received in TAS, signed and dated by the appointee on 10 April 2015 and in which she ticked a box to indicate that she was unable to attend the scheduled hearing and asking for another date to be arranged.  On 17 April 2015 an LQPM granted a postponement of the appeal.

18.	The substantive oral hearing of the appeal took place on 19 June 2015.  The appointee was present.  There was a Departmental Presenting Officer present.  The appeal tribunal disallowed the appeal and issued a decision notice to the following effect:

‘Appeal disallowed.  The appellant is no longer entitled to pension credit since the property at … falls to be taken into account from 7/10/12.’

19.	On 24 November 2015 an application for leave to appeal was received in TAS.  On 29 January 2015 the application for leave to appeal was refused by the LQPM.

	Proceedings before the Social Security Commissioner

20.	On 29 February 2016 a further application for leave to appeal was received in the Office of the Social Security Commissioners.  On 7 April 2016 observations on the application for leave to appeal were requested from Decision Making Services (‘DMS’).  In written observations dated 25 April 2016, Mr Crilly, for DMS, conceded that the decision of the appeal tribunal was in error of law but submitted that the identified errors were insufficient to vitiate the appeal tribunal’s overall decision.

21.	The written observations were shared with the appointee on 26 April 2016.  On 18 May 2016 a submission in reply was received from the appointee to which several documents were attached.  In summary the appointee made submissions in connection with the ownership of a property which was central to the decision making process giving rise to the appeal.

22.	The appointee’s submission received on 18 May 2016 was shared with Mr Crilly on 27 May 2016.  On 13 June 2016 a further submission was received from Mr Crilly.  I am setting out this submission in its entirety as, in a careful and analytical manner, it addressed Mr Crilly’s original written observations and his further comments in light of the response which had been received from the appointee.

‘In my original observations dated 25.04.16 concerning this case, I submitted that the tribunal had erred in law in 2 respects when deciding (the claimant’s) appeal against the Department’s decision dated 20.05.14.

I submitted in paragraphs 34 and 35 of my observations dated 25.04.16 that the tribunal had not sought clarification as to why (the claimant) had elected not to receive housing benefit in the form of rates in April 2006 in respect of her home at …  In addition, the tribunal had not gone on to fully consider the possible reasons as to why (the claimant’s) daughters had then accepted responsibility for the payment of the rates for the property from April 2006 onwards.  I went on to submit that this raised the possibility that (the claimant) could have informally relinquished her beneficial interest in the property in favour of her daughters which in turn raised an issue concerning the potential existence of an implied trust.  The tribunal had erred in not fully exploring this matter.

I also went on to submit in paragraphs 39 to 41 of my original observations that, if the Commissioner did not agree with my submissions concerning the possible existence of a trust, the tribunal had erred in its acceptance of the valuation of (the claimant’s) share in the property at …  I submitted the tribunal had found that, whilst (the claimant) was the sole legal owner of the property, she had a joint beneficial interest in it along with her daughters.  The valuation was carried out on the basis that the property was jointly-owned by (the claimant) and her daughters and the tribunal’s acceptance of it on this basis represented an error in law.

Ownership of property – tenancy in common

In her letter dated 17.05.16, [the] appointee has clarified that her mother was not the sole legal owner of the property from July 2002 onwards.  Indeed, the appointee has provided a letter from her solicitor which states that the property was purchased in July 2002 in the names of herself and her sister as well as (the claimant).

The appointee has also provided a copy of the Indenture of Conveyance which was drawn up when the property was purchased from the Northern Ireland Housing Executive (“the NIHE”) on 01.07.02.  This document makes it clear that (the claimant) and her daughters owned the property as tenants in common in equal shares from this date.  A copy of part of a document relating to the property’s registration with the Land Registry has been provided to verify it was still the case on 30.07.13 that the claimant and her daughters, the appointee and …, each continued to own an undivided third share of the property as tenants in common.

The question of property held under common ownership was considered in the English Court of Appeal in Hourigan v Secretary of State for Work and Pensions (2002) EWCA Civ 1890.  This decision was concerned with the interpretation of regulation 52 of the Income Support (General) Regulations 1987 which provides for the treatment of jointly held capital.  Lord Justice Brooke stated at paragraphs 16 and 17 of the decision:

“16. The language of regulation 52 lends itself naturally to a situation in which two or more people are jointly entitled to the equitable interest in the same capital asset.  They do not each possess a separate share in the equitable interest.  They are jointly invested with the whole of that interest together with the other joint tenants.  If there are two joint tenants and one dies, the other is solely entitled by survivorship to the whole beneficial interest.  Unity of interest is a necessary feature of a joint tenancy.  The natural effect of regulation 52 is therefore to treat that unity of interest as severed, and to treat the claimant as if he/she was entitled to an equal share (with the others) of the whole beneficial interest.  Thus he/she is to be treated as possessing what he/she does not in fact possess (see section 136(5)(b) of the 1992 Act).

17. With tenancies in common, there is no need to treat a claimant's unity of interest as if it had been severed for the purpose of computing fairly the capital he/she owns for the purposes of Part VII of the 1992 Act.  As Mr Commissioner Howell observed, a beneficial interest which a claimant owns as a tenant in common is an asset separately disposable by him/her, both in English and Scots law. . . .” 

A tenant in common has a definite percentage share in a property from the date of commencement of the tenancy in common.  In addition, each party under a tenancy in common has the right to dispose of their interest at any time.  Tenants in common may also own unequal shares or have different interests acquired at different times.  As in all forms of co-ownership, however, tenants in common have equal rights to possession and none is entitled to exclude any other from the property.

Valuation

Taking the above into account, I would now like to resile from my previous comments in relation to (the claimant) being the sole legal owner of … as this is clearly not the case.  At the same time, however, I continue to submit that the valuation provided by the Department is flawed in this instance for the reasons outlined below.

The valuation stated that (the claimant’s) actual undivided share of the property as a tenant in common was worth £30,000 on 04.10.12 and 28,000 on 04.10.13.  However, I submit that the valuer based these figures upon incorrect information provided by the Department that the claimant’s share of the property stood at 60%.  This represents the discount that was applied when the house was bought in July 2002 which meant that, instead of having to pay £60,000 to acquire the property at that time, only £24,000 was needed to complete the purchase.

I submit that it is clear from the documents now provided by the appointee that (the claimant) is not the legal owner of 60% of the property.  Rather, she is the owner of a one-third undivided share.  With this in mind, I submit that the current valuation was based upon incorrect information and, as a consequence, the amounts of £30,000 and £28,000 referred to above are erroneous as they do not provide a true reflection of the value of her actual share of the property.

If the Commissioner agrees with this submission, I respectfully submit that the decision of the tribunal which was based on the values of £30,000 and £28,000 respectively should be set aside.  I further submit that this case should be remitted to a new tribunal for determination as a further valuation will be required.  This valuation will take into account the fact that (the claimant) is the owner as a tenant in common of an equal undivided third share of the property with her 2 daughters each in possession of their own third share.

I submit that a new valuation will be necessary in this instance because there is a possibility that the value of (the claimant’s) third share at 04.10.12 and 04.10.13 could be substantially less than the respective amounts of £30,000 and £28,000.  If this were to be the case then any reduced amounts could result in (the claimant’s) underlying entitlement to state pension credit remaining intact if and when these lower figures are taken into account for the purposes of the award of her benefit.

The new tribunal

If the Commissioner agrees that the present case should be remitted to a new tribunal, I respectfully submit that that body will be required to take into account all of the relevant evidence contained in the appeal papers and to address any issues arising from this.  I further submit that this should include consideration of the circumstances surrounding the sale of the property along with the implications arising from the fact that the resulting co-ownership for (the claimant), the appointee and … was on the basis of a tenancy in common.

The appointee’s case

[The] appointee has consistently submitted that the property is owned by herself and her sister only.  This point has been reiterated in the appointee’s comments in the second paragraph of her correspondence dated 17.05.16:

“. . . . My sister and I took it upon ourselves to purchase the property, … – my Mother had no desire to purchase the property – the purchase was in accordance with the rules of the NIHE Scheme at the time whereby extended family members could purchase a NIHE property with the stipulation that the tenant’s name should remain on the Deeds for 5 years.  My Mother’s name would have been taken off the Deeds had it not been for the deterioration in her health.”

The Indenture of Conveyance and the evidence relating to the formal registration of the property with the Land Registry both clearly outline that (the claimant) is a co-owner of the house as a tenant in common.  However, the comments above, along with other statements made by the appointee, suggest that the neither she nor her sister regarded their mother as being an owner of the property.  She has submitted that this is supported by the fact that she and her sister alone were responsible for raising the finance of £24,000 which was required to buy the house outright in July 2002.  In addition, (the claimant) had no desire to own the house herself at that time and, as such, she did not contribute any monies towards its purchase.

It has also been submitted that, although (the claimant) was a co-owner of the house from 2002 onwards, her name was only registered on the Indenture of Conveyance to allow the appointee and her sister to avail of the discount of 60% when purchasing the property.  The intention of (the claimant), the appointee and … at the time of purchase was that the former’s name would be removed from the deeds of the house after the necessary 5 year period had elapsed in July 2007.  However, by that time her health had deteriorated to such an extent that it was not possible to transfer her third share to her daughters.  (The claimant’s) name could not have been removed prior to July 2007 as such an action would have required the repayment of the amount of the 60% discount, £36,000, to the NIHE.

Finally, there is the matter of the decision by (the claimant) not to avail of her possible entitlement to housing benefit in the form of rates.  The responsibility for the payment of the rates charge on the property was assumed by the appointee and …  The Department was notified of this in 2006.  The voluntary forgoing of entitlement to housing benefit may in itself be seen to support the assertion that (the claimant) did not believe that she owned a share in the property in any real sense.  Similarly, at the same time, the decision by the appointee and … to take on responsibility for the payment of the rates may also be indicative of their belief that they themselves were the owners of the house at …  It continues to be my submission that this question will need to be addressed by any new tribunal to allow findings of fact to be established before a decision concerning (the claimant’s) appeal is ultimately made.

The Department’s position

Whilst I have a certain degree of sympathy in relation to the arguments put forward by the appointee, I submit that this should not detract from the fact that (the claimant) is the owner of an undivided third share of the property in question.  I further submit that any deemed income from the capital value attributed to this share must be taken into account in (the claimant’s) award of state pension credit if the amount of that capital value results in the overall capital in her possession being in excess of the threshold of £10,000.  The reasons for this conclusion are outlined below.

The appointee has submitted throughout that only she and her sister are the owners of the property and that (the claimant) never regarded herself as being an owner.  It is true that they acquired the necessary finance of £24,000 which was required to complete its purchase in July 2002.  That said, however, the Indenture of Conveyance is unambiguous as to the fact that (the claimant) is the owner of a third share as a tenant in common.  She and her daughters are collectively referred to as “the Purchaser” in that document.  In the final analysis, if her name had not been included in the Indenture of Conveyance, the appointee and her sister would have been required to contribute £60,000 in total to acquire … instead of the lesser figure of £24,000 which they actually had to pay.  With this in mind, I submit that (the claimant) was involved in and contributed to the purchase of the property.

It may well have been (the claimant’s) intention that she would transfer her third-interest in the property to her daughters after the requisite 5 year period had expired in July 2007.  Such an intention would have reflected her belief and that of her daughters that she did not in effect own a share of the house and that such a transfer would formalise the true state of affairs; namely, her daughters were the real owners of the property by virtue of their contributions of £12,000 each to acquire it from the NIHE.  I also accept that the intention by (the claimant) to transfer her share was not initially realised in 2007 because of the deterioration in her health that had taken place by that time.  However, there was then a period of over 5 years between July 2007 and October 2012 when (the claimant) was admitted into residential care on a permanent basis during which there is no evidence of any attempt to resolve this question.

I submit that this means that (the claimant) is now in permanent care and, regardless of what her intention was in relation to discharging her ownership of her share in …, she is currently in possession of a capital asset.  I submit that this must be calculated in accordance with regulation 19 of the State Pension Credit Regulations (Northern Ireland) 2003 (“the SPC Regulations”):

19. Capital which a claimant possesses in the United Kingdom shall be calculated at its current market or surrender value less— 

(a) where there would be expenses attributable to sale, 10 per cent.; and

(b) the amount of any encumbrance secured on it.

In addition, the house itself appears to have been vacant from October 2012.  The A64(PC) booklet in the appeal papers indicates that it was still vacant in May 2014 and that there was no intention on the part of the appointee or her sister to dispose of it or to live in it.  As such, I submit that none of the disregards in Schedule 5 to the SPC Regulations appear to have been applicable to the property at 20.05.14, the date of the decision under appeal, to allow it to be discounted as capital for the purposes of calculating deemed weekly income.  Consequently, I submit that any deemed weekly income arising from the value attributed to (the claimant’s) third share as a result of a new valuation should be taken into account in the assessment of her award of benefit if it transpires at that point that the total amount of capital in her possession is in excess of the threshold of £10,000.
 
I further submit that any transfer of (the claimant’s) share of the property now would raise issues relating to deprivation and the consideration of notional capital.

Conclusion

I would like to resile from my previous comments concerning (the claimant) being the sole owner of …

I continue to submit, however, that the valuation relied upon by the tribunal is flawed and, as a result, the tribunal’s decision should be set aside.  I further submit that this case should be remitted to a fresh tribunal for determination which should involve the drawing up of a new valuation to reflect the fact that (the claimant) is the owner of a third share of the property as a tenant in common.’

23.	The further submission from Mr Crilly was shared with the appointee on 21 June 2016.  Further correspondence was received from the appointee on 5 July 2016 and 17 August 2016.  There then followed a lengthy administrative delay in the processing of the appeal due, for the most part, to the Legal Officer having to confirm the continuing validity of the appointee’s position as such.

24.	I agree with the careful submissions which have been made by Mr Crilly and for the reasons which have been set out by him also agree that the decision of the appeal tribunal is in error of law.

	Disposal

25.	The decision of the appeal tribunal dated 19 June 2015 is in error of law.  Pursuant to the powers conferred on me by Article 15(8) of the Social Security (Northern Ireland) Order 1998, I set aside the decision appealed against.

26.	I make the following directions:

(i)	In his submission of 13 June 2016 Mr Crilly has submitted that the Department should obtain a further valuation of the relevant property.  It will, of course, be for the Department to determine whether that remains an appropriate form of action.

(ii)	In any event, the Department is directed to prepare a further submission for the appeal before the differently constituted tribunal.  The further submission should draw on the detailed analysis of the issues arising in the appeal undertaken by Mr Crilly.  If a new valuation is obtained by the Department then the submission should address the detail of that valuation and its relevance.

(iii)	The further submission is to be shared with the appointee in advance of the appeal in order to allow the appointee to prepare her own submissions in connection with the issues arising in the appeal.

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

(v)	A Presenting Officer from the Department is to attend the oral hearing.

(signed):  K Mullan

Chief Commissioner

11 October 2017