[2005] UKSSCSC CIS_1480_2005 (01 September 2005)

CIS/1480/2005

DECISION OF THE SOCIAL SECURITY COMMISSIONER

1.	  The appeal is allowed.  I set aside the decision of the tribunal and the decision of the decision maker and I remit the claim to the secretary of state to determine the claimant’s entitlement to income support in accordance with the directions given below.

2.	  This is an appeal by the claimant with the leave of a district chairman from the decision of the Wolverhampton Appeal Tribunal given on 22 March 2005 dismissing, with obvious reluctance, the claimant’s appeal from a decision of a decision maker issued on 12 August 2004 that the claimant was not entitled to help towards interest repayments on a loan of £18,480 taken out with a company called igroup Loans Limited (“igroup”) on 13 August 2002.

3.	  The claimant is the carer and appointee of her husband who is seriously ill and disabled.  She was awarded income support from and including 1 April 2004.  She applied on 16 July 2004 for help with housing costs in respect of the loan from igroup.  In her application form, the claimant stated that she had one other home loan apart from her mortgage and that the loan was originally taken out to make other improvements and consolidate loans, but that it was then discovered that her husband had an inoperable brain tumour.  The loan was then used as to £2,200 to provide a stairlift, as to £9,000 to provide a bathroom with disabled access and as to £3,000 to provide a driveway and ramping to the front door for a wheelchair.  Further enquiries revealed that this work was carried out in September and October 2002, although it had been stated in the application form MI 12 that all the work was completed in September 2003.  It also transpired that the claimant had bought her home with a mortgage of £70,000.

4.	  No details were given of any other loan or mortgage, but the representative of the secretary of state, in the written submissions to the tribunal, states in paragraph 3 that the claimant and her husband have both the mortgage and “other home loans”, and the decision under appeal specifically refers to a loan of £15,000 of which £6,000 was being taken into account in calculating income support for the claimant.

5.	  In response to a further enquiry as to the balance of £4,280 not covered by the three items referred to above, the claimant advised that £367.85 was paid for mortgage arrears, £3,480 was paid as the balance owing for window and door replacements and £432.15 was paid as a fee for loan administration.

6.	  By letter of 25 November 2004, igroup wrote that the only reason given to it for the loan was consolidation.  Having reconsidered the decision of 12 August 2004 a decision maker decided that it could not be revised as it had not been used for “consolidation”, £14,200 had been used for the stairlift, external ramp and bathroom; the mortgage arrears and loan administration fee were not allowable housing costs and the £3,480 used to pay the balance for the window and door replacements could not be allowed because £6,000 out of an earlier loan of £15,000 was already being allowed for.

7.	  The claimant elected to have a paper hearing of her appeal.  Her letter of appeal emphasised the very serious financial, emotional and physical problems she was facing as a result of her husband’s illness and the burden that placed on her. The tribunal, while expressing every sympathy with her, accepted the facts as set out in the submissions of the secretary of state, which were substantially as set out above.  It also accepted the submissions of the secretary of state as to the law and dismissed the appeal.

8.	  Under regulation 17(1)(e) of the Income Support (General) Regulations 1987 the weekly amount of income support to which the claimant was entitled included “any amount determined in accordance with Schedule 3 (housing costs) which may be applicable to [her] in respect of mortgage interest payments or such other housing costs as are prescribed in that Schedule.”

9.	  Under paragraph 1(1) of Schedule 3, it is provided that 

“Subject to the following provisions of this Schedule, the housing costs applicable to a claimant are those costs-
(a)	which he, or, where he is a member of a family, he or any member of that family is, in accordance with paragraph 2, liable to meet in respect of the dwelling occupied as the home which he or any other member of his family is treated as occupying, and
(b)	which qualify under paragraphs 15 to 17.”

10.	The issue which has arisen on this appeal is whether the housing costs qualify under paragraph 16 of Schedule 3.  This provides that-

“16.  (1) A loan qualifies under this paragraph where the loan was taken out, with or without security, for the purpose of-
(a)	carrying out repairs and improvements to the dwelling occupied as the home;
(b)	paying any service charge imposed to meet the cost of repairs and improvements to the dwelling occupied as the home;
(c)	paying off another loan to the extent that the other loan would have qualified under head (a) or (b) of this sub-paragraph had the loan not been paid off,
and the loan was used for that purpose, or is used for that purpose within 6 months of the date of receipt or such further period as may be reasonable in the particular circumstances of the case.
(2) In sub-paragraph (1) “repairs and improvements” means any of the following measures undertaken with a view to maintaining the fitness of the dwelling for human habitation or, where the dwelling forms part of a building, any part of that building containing that dwelling- 
(a)	provision of a fixed bath, shower, wash basin, sink or lavatory, and necessary associated plumbing, including the provision of hot water not connected to a central heating system; 
(b)	 repairs to existing heating systems; 
(c)	damp proof measures;
(d)	provision of ventilation and natural lighting;
(e)	provision of drainage facilities;
(f)	provision of facilities for preparing and cooking food;
(g)	provision of insulation of the dwelling occupied as the home;
(h)	provision of electric lighting and sockets;
(i)	provision of storage facilities for fuel or refuse;
(j)	repairs of unsafe structural defects;
(k)	adapting a dwelling for the special needs of a disabled person; or
(l)	provision of separate sleeping accommodation for children of different sexes aged 10 or over who are part of the same family as the claimant.
(3) Where a loan is applied only in part for the purposes specified in sub-paragraph (1), only that portion of the loan which is applied for that purpose shall qualify under this paragraph.”

11.	The claimant has stated that the loan was originally to make improvements other than those in fact made, and to consolidate loans.  The lender, igroup, has stated that the only reason given to that company for the loan was consolidation.   The tribunal accepted the submission of the secretary of state that the loan was taken out only for the purpose of consolidation, and that as it was in fact used for another purpose which fell within paragraph 16, and not the original purpose of consolidation, the requirements of paragraph 16 were not satisfied.  It thus construed regulation 16(1) as meaning that if the loan was taken out for the purpose stated in sub-paragraph (c), it had to be used for that purpose and it was not enough that it should be used for the purposes set out in (a) or (b).

12.	By the same reasoning, if the loan had been taken out for the purpose stated in (a), but had then been used to pay service charges, a qualifying purpose under (b), or vice versa, the loan would also not qualify under paragraph 16.  On the other hand, if the claimant had repaid the loan and then immediately taken out a fresh loan for the new purpose, the new loan would have qualified.  There seems a certain absurdity in requiring claimants on income support to go through these, probably expensive, formalities in these circumstances.  It would also mean that if a loan initially to pay a service charge obligation was used in an emergency to repair the heating system and a further loan was then taken out to pay the service charge, then only the second of these loans would qualify, whereas if the claimant had the foresight to rush to the lender to borrow a second time to pay for the heating repairs and used the original loan to pay the service charge, then both loans would qualify.

13.	On the other hand, if, on this construction, the money was borrowed to carry out one type of repairs or improvements under (a) but was then used for a different repair or improvement under (a), the loan would still qualify because the purpose for which it was used was still to carry out relevant repairs or improvements.

14.	In my judgment, paragraph 16(1) is not to be construed in this way.  The use of the word “purpose” in that regulation is to be contrasted with paragraph 15 which provides that a loan qualifies under that paragraph if it is taken out “for any of the following purposes”, identified as “(a) acquiring an interest in the dwelling occupied as the home; or (b) paying off another loan to the extent that the other loan would have qualified under head (a) above had the loan not been paid off.”  The change of wording between two consecutive paragraphs is unlikely to have been accidental, and in my view strongly indicates that sub-paragraphs (a), (b) and (c) of paragraph 16(1) are to be regarded as a single purpose.  This also appears from the wording of paragraph 16(3), which also treats the purposes in paragraph 16(1) as a single purpose.

15.	I therefore conclude that provided both the initial purpose of the loan and the purpose for which it is used fall within paragraph 16(1), it is irrelevant that they are not the same.  The position would be different if the initial purpose of the loan fell outside paragraph 16(1) entirely.  In those circumstances the loan would not be housing costs by virtue of paragraph 16 even if it was in fact used for a purpose within paragraph 16(1).

16.	The representative of the secretary of state on this appeal has referred to CIS/6010/95 as reflecting the significance of the purpose of taking out the loan.  I agree that the purpose of taking out the loan is important but in this case it appears to have been accepted by the secretary of state that the purpose for which the loan was taken out did fall within paragraph 16(1).  I have seen no evidence of this, but as it has never been in issue, it is unnecessary for me to consider it further.

17.	Provided that all the purposes for which the loan was originally taken out fell within paragraph 16(1), it is unnecessary to decide whether the loan was originally taken out solely for loan consolidation purposes or whether it was partly taken out, as the claimant contends, for other improvements.  The decision maker, unlike the representatives of the secretary of state on the appeal, appears to have proceeded on the basis that part of the loan was taken out for other improvements, and went on to consider whether part of the loan was used for permitted improvements falling within paragraph 16.  The decision maker, however, only applied this test to the remaining £4,280 after most of the loan had been used to pay for the improvements effected for the benefit of the claimant’s husband.

18.	The purposes for which the loan was taken out must be decided on all the evidence, and not just on the understanding of the lender.  Although information given by the claimant to the lender must be strong evidence of the original purpose of the loan, it is not necessarily determinative of the issue.  If, for example, the claimant can show that the amount she required to pay off the earlier loans was, say, £14,000 and she borrowed £18,480, then it must be clear that the balance was borrowed for another purpose, whatever the understanding of the lender.

19.	Assuming that the loan of £18,480 was all for a purpose within paragraph 16(1), then the question arises as to the extent to which the loan was used for such a purpose.  The £14,200 used for the stairlift, external ramp and bathroom adaptations was clearly used to adapt the dwelling for the special needs of a disabled person, her husband, and is therefore within paragraph 16 – see paragraph 16(2)(k).  

20.	Of the balance, £367.85 is stated to have been used to pay mortgage arrears.  That does not fall within paragraph 16 unless the mortgage where the arrears existed was itself in respect of a loan which qualified under paragraph 16(1)(a) or (b).  It might also fall within paragraph 15 if the mortgage arrears would have qualified under paragraph 15(1)(a) as a loan to defray monies applied to acquire an interest in the dwelling occupied as the claimant’s home.

21.	Secondly, £3,480 is stated to have been used to pay the balance for window and door replacements.  The decision maker found that this could not be allowed because the DWP was already allowing £6,000 for window replacements on a loan for £15,000 taken out in July 1998.  I am not clear on what basis that £6,000 was allowed, but if it was under paragraph 16, then to the extent that the £3,480 was used to repay all or part of the qualifying part of the 1998 loan, the new loan qualifies under paragraph 16.

22.	Finally, £432.15 is said to have been used for a loan administration fee.  I am unclear as to the loan in respect of which the fee is said to have been paid, and as to the reason for the fee.  If the fee was part of the cost of paying off all or part of the 1998 loan, then it would seem to qualify to the same extent as the payment off of £3,480.  If it was a fee deducted from the advance by igroup, however, then to that extent the loan does not appear to me to have been used for any of the purposes in paragraph 16.  So too, if it was a charge because of the arrears, it would not have been a housing cost under the earlier loan (CIS/392/1994), so that paying it off would not fall within paragraph 16(1)(c).

23.	For the reasons given, the tribunal and the decision maker were in error of law in their construction of paragraph 16.  I therefore set aside both decisions, and I substitute my own decision remitting the matter to the secretary of state to determine the extent to which the claimant is entitled to assistance with housing costs on the following basis –

(1)	Provided that the decision maker is satisfied that the loan from igroup was taken out for a purpose which falls within paragraph 16(1), then to the extent that the loan was used for any purpose within paragraph 16(1), even if different from the purpose for which the loan was originally taken out, it qualifies for housing costs under that paragraph.
(2)	The provision of a stairlift, external ramp and bathroom for the special needs of the claimant’s husband in the dwelling or in the building of which the dwelling forms part, is a purpose which falls within paragraph 16 of the Income Support (General) Regulations 1987.
(3)	The question whether the other items on which the balance of the loan was spent fall within paragraph 16 is to be determined in accordance with paragraphs 20-22 above.

(signed on the original)	Michael Mark
Deputy Commissioner
1 September 2005