CIS/4757/2003

DECISION OF THE SOCIAL SECURITY COMMISSIONER
  
1.	The claimant’s appeal is unsuccessful.  I set aside the decision of the Wolverhampton appeal tribunal dated 5 June 2003 but substitute a decision to the same effect:  the claimant’s award of income support falls to be superseded with effect from 3 March 2003 on the ground that there has been a change of circumstances in that she acquired capital in excess of £8,000 on 30 August 2002 and it is to be disregarded only until 2 March 2003. The claimant is not entitled to income support from 3 March 2003.  However, I draw attention to paragraph 24 below.

REASONS

2.	I held an oral hearing of this appeal at Cheltenham county court.  The claimant was represented by Mr Tom Horder of the Western Circuit Free Representation Unit and the Secretary of State was represented by Mr Huw James, solicitor acting as agent for the Solicitor to the Department for Work and Pensions.

3.	The claimant became entitled to income support from 9 November 2001.  On 30 August 2002, she transferred her interest in her home to her former husband for £70,000 and the following day she moved into rented accommodation.  The fact that she had capital did not become known to the Secretary of State until he received another claim form from the claimant, dated 28 January 2003 and, by a decision notified to the claimant on 6 February 2003, he “closed” the award from 29 January 2003.  The merits of that decision do not need to be considered because, after the claimant had appealed against it, the Secretary of State revised the decision on 24 April 2003 (not 24 February 2003 as suggested in the submission to the tribunal) and decided that the claimant’s capital should be disregarded until 2 March 2003 on the ground that she intended to use it to purchase another home.  By that time, the amount of capital had been reduced to slightly over £55,000.  The Secretary of State decided not to disregard the capital after 2 March 2003 in the light of evidence about the claimant’s health because he took the view that the claimant had had sufficient time to purchase a property, both before and after she had moved, that she had spent only three brief periods in hospital and that she now appeared to have concluded that her financial means were insufficient to obtain a desirable property.  The claimant’s appeal proceeded as an appeal against the revised decision and it was dismissed on 5 June 2003 at a paper hearing.  The claimant now appeals against the tribunal’s decision with my leave.

4.	Technically, the appeal should have lapsed if the decision appealed against was revised to the claimant’s advantage (see section 9(6) of the Social Security Act 1998) but there is some doubt as to whether the decision of 24 April 2003 was ever issued to the claimant in the proper form and all parties are content to accept that the tribunal had jurisdiction to consider the appeal and give the decision it did to the effect that the claimant’s capital was to be disregarded until 2 March 2003 but not thereafter.  The question is whether the tribunal erred in law in reaching that decision and, if so, whether I should substitute a different decision.

5.	Having referred to paragraph 3 of Schedule 10 to the Income Support (General) Regulations 1987, which provides for there to be disregarded “any sum attributable to the proceeds of sale of any premises formerly owned by the claimant as his home which is to be used for the purchase of other premises intended for such occupation within 26 weeks of this date of sale, or such longer period as is reasonable in the circumstances to enable the claimant to complete a purchase”, the tribunal said:-

“Where the appellant has not even embarked on the purchase of property it would not be possible to extend the period beyond six months unless evidence has been submitted to support active measures being taken to secure the purchase of property.  It is likely that the appellant will continue to erode the capital over the coming months until it is highly unlikely that she will be able to purchase property.

“Although the Tribunal accept that the period during which a claimant may reapply proceeds of the sale of one house with the purchase of another may be extended on the basis of individual circumstances, the Tribunal cannot be satisfied that the appellant has indicate any credible intention to purchase another property.  In reaching this conclusion it is noted that the appellant has considered different property alternatives such as a mobile home, or purchasing land to build a house from scratch, but she has not produced any evidence to verify those options or indicated that research that she has carried out in order to determine whether the purchase of a property would be appropriate in the circumstances.  Whilst the Tribunal is sympathetic to the appellant’s circumstances, during what must have been a very difficult period for her, the Regulations cannot be read as intending that a person from ill health may receive Income Support and live off their capital for an indefinite period until they decide whether the capital should be reapplied for the purpose of housing or not.  The less capital that the appellant has and the less likelihood that there is of raising money through a mortgage, the less likely it then becomes that the appellant will apply any remainder of the capital for house purchase.  The actual amount of the money remaining within the ‘house purchase’ account is not necessarily crucial as long as it is in excess of the qualifying limit for a claim to Income Support.  The appellant is not entitled to ‘ring fence’ a sum of money as her house purchase account and simply have that disregarded.”

6.	In submitting that the tribunal erred in law, Mr Horder relied on R(IS) 7/01 and also CIS/685/1992, CIS/8475/1995 and CIS/15984/1996 to which I referred in that decision.  I accept that the fact that a person is ill is a matter properly to be taken into consideration when deciding whether to extend the standard six-month period for which the proceeds of sale of a home are to be disregarded.  The Secretary of State does not argue to the contrary.  As Mr Horder submitted, any other approach would be inconsistent with CIS/8475/1995 in which the Commissioner considered that the fact that a claimant was building a house from search justified an extension of time, and CIS/15984/1996, in which the Commissioner accepted that the fact that the location of a proposed new home might depend on the results of job applications might also justify an extension of time.  Personal circumstances are plainly to be taken into account.  There has to be some practical certainty that the claimant will purchase a new home with the capital but explanations for delay based on the claimant’s personal circumstances may enable a claimant to demonstrate that the practical certainty remains despite the delay.  Illness can obviously also be a reasonable explanation for delay, but the problem from a claimant’s point of view is that, if chronic illness is relied upon to explain delay in purchasing a house, it may also suggest that there will be indefinite delay so that it becomes impossible for the claimant to show that there really is a practical certainty that a home will be purchased within any reasonable time or at all.

7.	In his representative’s written submission, the Secretary of State conceded that the tribunal erred in law because, although the tribunal found as a fact that, “[d]ue to health problems, the claimant had not been in a position to look round to purchase another property”, it had not, in the Secretary of State’s view, said whether or not that fact justified an extension of the 26 week limit or given reasons for that conclusion.  It is therefore submitted that the tribunal’s decision is erroneous in point of law on the ground that inadequate regard was had to the claimant’s ill health but that it was nonetheless correct to disallow the appeal on the evidence before it.

8.	I have to say that I find the first part of that submission difficult to follow and I sensed that Mr James did too.  It seems to me that the tribunal plainly did have regard to the claimant’s health and found that it did not justify an extension of the 26 week period and it also seems to me that the tribunal’s reasoning is clearly set out in the part of its decision I have set out above.  The real issue is whether the reasoning is flawed and whether for that reason the tribunal had inadequate regard to the claimant’s ill health.

9.	Mr Horder submits that the reasoning is flawed.  He submits that the tribunal erred in so emphatically stating that it was not possible to extend the standard period “unless evidence has been submitted to support active measures being taken to secure the purchase of a property”, which he submits is inconsistent with R(IS) 7/01.  He further submits that the statement that “the Regulations cannot be read as intending that a person suffering from ill health may receive income support and live off their capital for an indefinite period until they decide whether the capital should be reapplied for housing or not” implies that the tribunal were of the opinion that the claimant had not formed an intention to use the capital for housing contrary to the previously undisputed evidence.  In fact the tribunal said in terms that it was not satisfied that “the appellant has indicated any credible intention to purchase another property”.

10.	In a case like the present, the question whether capital should be disregarded under paragraph 3 of Schedule 10 to the 1987 Regulations for more than 26 weeks gives rise to two related, but nonetheless distinct, issues.  The first, which is sometimes overlooked, is whether the claimant can still demonstrate an intention to use the proceeds of sale of the former home to purchase another one.  The second is whether it is reasonable to extend the standard 26-week period.  The two issues are related because the necessary intention will be shown only if it is reasonably certain that the claimant will use the capital to buy another home within the 26-week period or such extended period as is reasonable.  (A reasonable degree of certainty is required because normally a person is expected to support himself or herself out of any capital that is held.  The disregarding of realised capital under paragraph 3 is a clear exception that could be abused if a mere expression of hope to purchase another property were sufficient to bring it into play.  The legislation therefore requires that it be proved that the capital “is to be used” for the purchase of a home.)  Conversely, the fact that it is reasonably certain that a property will be purchased within a further identifiable period of time will be a powerful argument for extending the period.  However, it will not always lead to that conclusion.  It seems to me to be relevant that delay will not usually result in the Secretary of State incurring expenditure in the form of income support because the capital is disregarded whether it is invested in a home (see paragraph 1 of Schedule 10 to the 1987 Regulations) or it is to be used for that purpose in the future (under paragraph 3).  On the other hand, delay may result in the Secretary of State incurring expenditure in the form of housing benefit subsidy to a local authority that has paid housing benefit while the claimant has been living in rented accommodation, although against that must be set any additional income support that might be paid in respect of housing costs once a home has been purchased by a person whose circumstances suggest that he or she will remain entitled to income support.  Thus, it is possible, but not inevitable, that it may be decided in a particular case that, although there is reasonable certainty that capital will be used to purchase a home, it is not reasonable to extend the period for which it is disregarded because there has been unjustified delay or because too much further delay in anticipated.

11.	I have emphasised that it is necessary to consider whether the claimant still intends to use the capital to purchase a home after 26 weeks not because the legal test is different after 26 weeks but because the existence of the standard period suggests that 26 weeks is considered a period that is generally sufficient to purchase a new home so that, while the Secretary of State may be expected fairly readily to accept a claimant’s assertion that capital is to be used to buy a new home during the first 26 weeks after the sale of the previous home, he may require more persuasion that the intention still exists after that period.  There is thus a practical burden on a claimant to provide more evidence that he or she still intends the capital to be used for that purpose after the 26 weeks has expired.  It will normally be necessary for a claimant to explain the delay and to suggest an alternative period within which a purchase will be completed and for which it will be reasonable to disregard the capital.  Only if the claimant demonstrates that it is still intended to use the capital for the purchase of a home does it become necessary to consider whether it is reasonable to extend the period for which the capital is disregarded.  For the reasons I have given, if the necessary intention is shown, an extension of the period will often follow.

12.	 I am prepared to accept that the tribunal’s reasoning is flawed but not entirely for the reasons advanced by Mr Horder.   I agree with Mr Horder’s submission that it may occasionally be possible for a claimant to show an intention to purchase a home notwithstanding that no active steps have been made within the standard 26-week period.  However, I do not agree with his submission that the tribunal erred in concentrating on the question whether the claimant still had an intention to use her capital to purchase her home.  Nor does its finding that the claimant did not have an intention to purchase a home after the 26-week period had ended imply that it did not accept that she had had such an intention during that 26-week period, as to which there was no dispute between the parties.  A person’s intention may change or may cease to be realistic.  It is not enough that the claimant was doing all that she reasonably could if in fact it had become unlikely that she ever would be able to purchase a home.

13.	I accept that, generally, illness that prevents a person from taking active steps to purchase a property will explain delay and justify an extension of time if the claimant can still show an intention to purchase a home.  The Secretary of State had not submitted to the contrary.  However, there was a dispute between the Secretary of State and the claimant as to whether the claimant’s ill health really had prevented her from taking more steps to purchase a home.  The tribunal did not make a clear finding on that issue, although it appears to have had some doubts as to whether she had made any serious steps at all.  However, the lack of a finding is explained by the fact that it was satisfied that there were other reasons for finding that the claimant no longer intended to buy a property.  In particular, the tribunal found that the claimant was not in fact preserving her capital and that she would continue not to do so and then would be unable to purchase a home.  Indeed the Secretary of State had relied upon the claimant’s own statement in her letter of 30 March 2003 that “I do not have enough capital and cannot get a mortgage due to continuing illness and ability to work” in arguing that the claimant had concluded that her financial means were insufficient to obtain a desirable property.

14.	I do not consider that reasoning to be wrong on its face but it overlooks three issues arising on the evidence.  The first is that the claimant’s letter of appeal expressly raised the point that she hoped her condition would improve so that she would be able to obtain a mortgage so that, even if her current resources were inadequate, her position was that she still had a realistic prospect of purchasing a home.  The tribunal did not address that issue.

15.	Secondly, the tribunal overstated the amount by which the claimant’s capital had been reduced.  There had been payments to a friend that the Secretary of State had initially thought were repayments of a loan from that friend but which he had subsequently accepted were short-term loans to that friend.  That capital had therefore been converted from money in an account to a chose in action, which is another form of actual capital.  It is unnecessary to determine its value precisely.  The important point is that there was an expectation that the money would be repaid to the claimant within a short space of time, in which case she would again have it available to spend on the purchase of a home.  

16.	Thirdly, the tribunal did not adequately explain its view that the claimant’s capital would continue to diminish even if she were to be awarded income support.  Apart from the loan already mentioned, the other main cause of the claimant’s capital having reduced was her expenditure on medical bills.  It has not been suggested that the fact that she was obliged to spend that money on medical bills meant that the money had not been intended for use in buying a home before then.  The more important issue is that, again, the question whether there was likely to be further expenditure depended on the claimant’s prognosis.

17.	I appreciate that the tribunal was not helped by the claimant’s request that her appeal be considered on the papers and that on the papers there was no evidence that the claimant’s condition, described by a consultant as chronic, was likely to improve, but that did not entitle the tribunal not to deal with that all-important issue.  The tribunal could have adjourned or it could have made a finding one way or the other upon such evidence as there was.  It erred in law in failing to do either.

18.	I therefore set aside the tribunal’s decision and turn to consider what decision I should substitute for it.

19.	I am conscious that the Secretary of State’s decision was given in February 2003 and that section 12(8)(b) of the Social Security Act 1998 prohibits me from taking account of any circumstances not obtaining then. However, I am not entirely obliged to close my eyes to subsequent events.  What has actually happened may throw some light on what was likely, in February 2003, to happen or on what was intended in February 2003.

20.	The claimant gave evidence to me.  She has plainly been very ill for some time and that was one cause of the breakdown of her marriage.  Her condition was undiagnosed from 1995 to 2002 but now it is believed that she suffers from endometriosis.  It causes very considerable abdominal pain.  She has been admitted to hospital on a number of occasions – sometimes following a collapse or for pain management and on other occasions for surgery.  For some time she was confined to a wheelchair and a letter from her general practitioner in June 2004 describes her as being housebound.  I accept that the claimant’s condition would have made it difficult to find a home.

21.	However, in my judgment it is not so much the immediate physical effects of the illness that stopped the claimant from buying a property but the uncertainty of the prognosis and the amount of capital available to her, which needed supplementing if a property was to be bought.  There has been no very substantial improvement in her condition.  She told me that, in April 2003, she invested some £49,000 in a property improvement scheme, for a return of 7 per cent.  The property was owned by another member of the syndicate.   In about April 2004, the claimant moved into the house, paying rent.  In June 2004, the house was sold but there is still a similar investment scheme.  The claimant had drawn on her original investment before the sale and only some £39,000 is now invested.  The claimant now hopes to buy a room in the house under a co-operative housing scheme.

22.	It is quite plain that in January 2003, or even April 2003, there was no prospect in the claimant’s mind of her buying a home in the foreseeable future.  She had insufficient capital and no prospect of obtaining a mortgage or, at any rate, no plan to do so.  She wanted to use her capital to buy a home but I agree with Mr James that that aspiration was not sufficient.  She may have hoped she would get better but I am satisfied that that was not likely.  It was perfectly sensible of the claimant to invest the money as she did but, for the purposes of income support, it was the same as investing it in a bank or building society account.  There was not the practical certainty of the money eventually being used for housing purposes. Nothing that happened in the following year made any difference.

23.	Had the claimant had the money, I do not believe her illness would have stopped her from buying a property at some point during 2003.  It would have made it difficult, not least because it may have limited the types of property that were suitable, and she would probably have taken longer to find a property and buy it; but she is clearly a capable woman with support from friends and I consider that she would have managed it.  The greater significance of her illness in this case is that it put a mortgage out of the question and that really put paid to “the purchase of premises” as far as the claimant was then concerned.  In those circumstances, the claimant’s capital was not, in early 2003, “to be used for the purchase of premises” to be occupied by the claimant as her home.  The claimant had no plan or even any expectation that it would be used for that purpose.  At best, she had a mere hope or aspiration.  It follows that I must disallow the claimant’s claim from 3 March 2003.

24.	Now there has been a change of circumstances because the claimant is considering buying “premises” that are very much cheaper than a house or even the mobile homes she had been thinking about at the beginning of the 26 week period but had stopped considering by the end of it.  Section 12(8)(b) of the 1998 Act prevents me from determining whether the claimant might now be entitled to have her capital disregarded but it is certainly arguable that she is, notwithstanding that she has not continuously had a practical certainty of purchasing a new home. Such an approach would appear to be consistent with the policy behind the statutory provision because it would prevent any further erosion of capital directly attributable to the sale of the former home and, if the purchase of the room is seriously being contemplated and is feasible, it is just as reasonable to disregard the capital now as it would have been to disregard it from March 2003.  The length of time for which a person has already had capital disregarded is, as I have suggested, material when considering whether there should be an extension.  In this case, it remains six months, as was the position in March 2003.  However, before the Secretary of State can consider whether the claimant’s capital should now be disregarded, it will be necessary for the claimant to make a new claim for income support, if she has not already done so.

	(signed on the original)	MARK ROWLAND
Commissioner
13 June 2005