[2007] UKSSCSC CIS_2661_2006 (19 January 2007)
CIS 2661 2006

DECISION OF THE SOCIAL SECURITY COMMISSIONER

1 I allow the appeal. For the reasons below, the decision of the tribunal is wrong in law. It is set aside. Although I allow the appeal, I do not agree with the grounds given by the Secretary of State for the appeal. Nor can I decide it without further facts being found. I therefore refer the appeal to a new tribunal to consider in accordance with the directions in this decision.  

2 The Secretary of State for Work and Pensions is appealing with permission of a chairman against the decision of the Leeds appeal tribunal on 16 02 2006 under reference U 01 013 2006 00400.
  
3 DIRECTIONS FOR REHEARING

A The rehearing will be at an oral hearing. 
B The new tribunal should not involve any member who has previously been a member of a tribunal involved in this appeal.
C The claimant is reminded that the tribunal can only deal with the appeal as at the date of the original decision under appeal. 
D If either party has any further written evidence to put before the tribunal, this should be sent to the tribunal within one month of the issue of this decision. 

These directions are subject to any later direction by a district chairman. 

REASONS FOR THE DECISION 

The decision under appeal

4 Mrs P, the claimant, applied for income support. In reply to standard questions she declared that she was owner, with her husband, of a house (“the house”) other than her home. (It is not clear whether this means joint owners in the technical sense or the general non-technical sense that also includes tenants in common). It was the former matrimonial home. Her husband still lived there. She had no intention of selling the house because he lived there. He was neither willing to buy her share nor sell his share or the house.  She had no intention of starting divorce proceedings or of living in the house. There were no tenants at the house. She indicated while making the claim the professional advice to her that because of Commissioner’s decision R(IS) 1/03 she was not regarded as having any interest in the house for income support purposes unless and until the family courts made an order about the sale of the house. She was not asked about her relationship with her husband save that she confirmed that there were no divorce proceedings ongoing. There is no evidence that Mrs P is absent from the house because of repairs, or the need for repairs, to the house. She was (and is) under 60.   

5 The decision maker who handled the claim for the Secretary of State assumed without further information that Mrs S had capital worth half the net value of the whole house sold freehold after mortgage costs and disposal costs had been deducted. She was therefore refused income support because she had too much capital. She appealed on exactly the same grounds as she initially put to the Department, namely the advice to her about R(IS) 1/03.  The record of the decision, the reconsideration, and the submission to the tribunal suggest that no notice was taken of that point by Department staff.

6 Her appeal was considered at a paper hearing. Her solicitors made an identical written submission to the tribunal as that already seen by Departmental staff. The tribunal agreed with the submission and upheld the appeal. The Secretary of State asked for the decision of the tribunal to be set aside under section 13(2) of the Social Security Act 1998. That request did not mention R(IS) 1/03. The Secretary of State was instead granted permission to appeal. 

7 The view of the Secretary of State about R(IS) 1/03 was only put on record when I specifically directed that a submission be made on it. The submission, when it came, was that R(IS) 1/03 was irrelevant. If that was the view, why did not someone say so at an earlier stage? The tribunal certainly did not have the benefit of that view despite the strong argument before it from the other side, of which the Secretary of State had full notice, that it was not only relevant but also determinative. The secretary of state's representative’s main submission to me was, in effect, that the tribunal did not have the full facts before it so could not decide as it did. That meant, of course, that the decision maker acting for the Secretary of State did not have the full facts. And I again remind the Secretary of State of R(IS) 15/96. Claimants should be advised by the Secretary of State of relevant disregards so that they can take advantage of them. That is all the more relevant when a claimant raises the issue of a disregard only to have it disregarded.  

8 In reply the solicitors acting for Mrs P again drew attention to R(IS) 1/03, and also CIS 4843 2002. They also raised the issue that the arrangements between Mrs P and her husband might constitute a constructive trust and life tenancy that gave her only a future interest in the property. That would raise the question of the application of Schedule 10 paragraph 5. in support of that point, they referred to R(IS) 1/97. 

The questions to be answered

9 The problem in this appeal, like so many in income support, is a straightforward and common set of facts placed alongside a fiendishly complicated set of rules.  The starting point, as Mrs P was correctly advised, is that she must declare all her capital.  That is required by section 134 of the Social Security Contributions and Benefits Act 1992. What is her capital?  She declared none save for her ownership, with her husband, of the house where he lived and she did not. The tribunal accepted that. 

10 Regulation 46 of the Income Support (General) Regulations 1987 (“the Regulations”) requires that the whole of her capital be taken into account unless it is disregarded under Schedule 10 (capital to be disregarded). The first questions that must therefore be considered in this case are those raised by the exemptions in Schedule 10. The submission to the tribunal was that none of them applied. That was wrong, because the Secretary of State, on his own admission in his grounds of appeal, did not have enough information to decide that. Mrs P was not asked all the necessary questions to establish the relevant facts.  

11 Turning to Schedule 10, the Secretary of State did know that the house was not Mrs P’s home, so paragraph 1 did not apply. 

12 The house was not premises acquired for future occupation, so paragraph 2 did not apply. 

13 Paragraph 3 is not relevant as there are no proceeds of sale in question (although it was relevant in R(IS) 1/03, the case on which the solicitors based their argument).

14 The Secretary of State did not know if paragraph 4(a) should apply. This provides:

“Any premises occupied in whole or in part by -

(b) the former partner of a claimant as his home; but this provision shall not apply where the former partner is a person from whom the claimant is estranged or divorced.” 

“Partner” means a member of a couple. Mrs P and her husband are a couple if married to each other and members of the same household (Regulations, regulation 1). Mrs P’s information makes it clear that they are not living in the same household, so she and her husband must be “former partners”. Are they estranged or merely separated? That is not defined. I take “separated” to mean that they are still married but not members of the same household (in which case it adds nothing to the designation in the regulation of Mrs P’s husband as a former partner). “Estrangement” clearly adds another element. See CIS 4843 2002. R(IS) 5/05, following R(SB) 2/87, indicates that it has a connotation of disharmony. There is no evidence in this case about why Mrs P and her husband are living in two separate households, and therefore no basis to find if such disharmony is present.  

15 To establish if the exception applies, it has to be decided if Mrs P’s husband is her former partner rather than her current partner. If they are still partners, then the disregard does not apply. Assuming that they are former partners, it has to be further decided if Mrs P is separated from her former partner or estranged from him. If they are former partners, and separated and not estranged, then the disregard does apply. Neither of those issues has been decided.  

16 If Mrs P and her husband are estranged, then paragraph 25 must be considered.   
The house is to be disregarded as capital for 26 weeks from the time when she “ceased to occupy what was formerly the dwelling occupied as the home following estrangement”. If the former partner remains in the home as a lone parent, then the disregard continues. If the tribunal establishes that Mrs P and her husband are estranged, it must then find when they became estranged and also when she left the house after that estrangement. Neither the Secretary of State nor the tribunal have information about that. Nor did they have information about whether her husband was looking after any children. I have now been told that he is not, but that has also to be found as fact. 

17 In some cases paragraph 26 will be the next relevant exclusion. Was the claimant taking reasonable steps to dispose of the premises? That could raise difficult questions about what steps Mrs P could reasonably take other than by matrimonial proceedings. But I see no relevant facts suggesting this need be considered here, so explore it no further. 

18 It is only if 
(a) Mrs P is estranged from her husband and 
(b) paragraphs 25 and 26 do not apply 
that the issue of the capital value of the house has to be investigated further. If so, then the next question raises the issues in R(IS) 1/03 and R(IS) 1/97. 

19 Paragraph 5 disregards any future interest in property, other than land subject to a tenancy. This is another issue not fully explored to date, as the solicitors for Mrs P represent. There is at present no clear evidence of any tenancy or other agreement between Mrs P and her husband (nor of any need for one), or with any other person. Is her interest in the house nonetheless a future interest as she and her solicitors have argued throughout the case and as the tribunal concluded? The final submission for Mrs P raises this in two ways: with regard to any interest by reason of matrimonial proceedings, and with regard to Mrs P’s interest arising from the arrangements with her husband. 

20 R(IS) 1/03 concerned a decision to refuse income support to a wife who had left the matrimonial home after domestic violence. The precise disregard was based on notional capital treated as possessed by the claimant because she had waived her right to receive any capital sum from the sale of the former matrimonial home. The deputy commissioner held that to be wrong, as there was no question of notional capital arising on the facts. It was found that the claimant had no legal title, joint or otherwise, to the home. This was because it was sold by the husband without her involvement. The tribunal considered that the claimant had actual capital in her right to claim a share of the proceeds. The deputy commissioner set that decision aside. He decided instead that she had no relevant capital. Her interest was “an equitable interest by virtue of the Matrimonial Causes Act 1973 which she could realise either in divorce proceedings or in proceedings for judicial separation” (paragraph 5). The claimant had no wish to bring such proceedings for a well-founded reason. There was no evidence of any other interest in the property.  The deputy commissioner concluded that her rights under that Act were not such as to give her an interest in any particular property (paragraph 12). He also concluded that this contingent right could not be regarded as property at all. So there was no capital of which the claimant could deprive herself.

21 I agree that the facts here (so far as found) are essentially different from that case. Mrs P does have part legal ownership of the house. I agree with the secretary of state's representative that R(IS) 1/03 is therefore not by itself determinative of the case. The tribunal is wrong in law in deciding otherwise. But I disagree with the secretary of state's representative that R(IS) 1/03 is therefore irrelevant. It remains directly relevant on the facts because it excludes any additional rights that Mrs P might have – additional, that is, to her current interest in the house - were she to take matrimonial proceedings. It is only Mrs P’s current interest in the house that is relevant, if not excluded by any of these provisions.  

22 R(IS) 1/97 concerned an estranged husband and wife. He bought the matrimonial home in which they both lived from 1941 until he moved out in 1968. this was another case where she had no legal title to the home. The recorded facts are that when he moved out he agreed with his wife that she could live there for the rest of her life. After a thorough analysis of the relevant legislation and caselaw, the Commissioner reached the conclusion that the wife was a tenant for life under the Settled Land Act 1925 under a constructive trust. As a result, the interest of the husband in the house became a reversionary interest only. It was therefore excluded from his capital for the purposes of his income support claim by paragraph 5 of Schedule 10. “Any question of any technical difference between a reversionary interest and an interest in the remainder is one of semantics, and the term included an interest which did not afford any present enjoyment (paragraph 12).” 

23 There is limited detail in this case about the terms of any explicit or implicit agreement or arrangement between Mrs P and her husband about his occupation of the house. Whether the submission of the solicitors under R(IS) 1/97 is appropriate is therefore dependent on findings of fact not yet made. R(IS) 1/97 clearly rehearses the relevant issues thoroughly, and I do not need to repeat them here. But the issue of the arrangements for occupation of the house must be clarified so that the relevance of paragraph 5 can be decided properly. As with paragraph 4, there is currently insufficient information for the matter to be determined. 

24 That deals with Schedule 10. It is possible that three of the paragraphs are relevant: paragraphs 4, 5 and 25. If – and only if - none of those provisions apply at the relevant time, the next question, which also has not been answered, is whether Mrs P’s interest in the house is as a joint tenant or a tenant in common. At one time it would be safe to assume that most properties purchased by husband and wife were joint tenancies. It is now far more common, for example for inheritance tax planning reasons, for couples to be advised to buy a house under a tenancy in common. That is important because it directly affects the valuation of the individual’s share of the property purchased. 

25 I consider that English and Welsh tribunals should take judicial knowledge of that fact and not merely assume a joint tenancy. It is a matter that can now be resolved easily. All real property in England and Wales is subject to compulsory registration of title. And all titles are now searchable via the internet as a small charge. A search I undertook about the house at www.landregisteronline.gov.uk confirmed in a matter of seconds that the house is registered freehold. On payment of a small fee it could be confirmed if it was held as a joint tenancy or a tenancy in common.   

26 If the house is held as a joint tenancy, and there is no tenancy for life, then it needs to be established whether there is any other arrangement between Mrs P and her husband about his occupation of the house. But, in any event, she cannot simply sell the house while he lives there if he refuses either to buy her out or agree to the sale. Mrs P told the Department that her husband could not afford to buy her out, and was not willing to sell. Nor was there any agreement about any sale, or any court order about a sale. He is entitled to occupy the house as a joint tenant (or as a tenant in common) without any express agreement. 

27 What is the value of her capital asset if she is a joint tenant? Regulation 49 of the Regulations puts it as the current market or surrender value after deduction of any encumbrance and less 10 percent for sale expenses. I emphasise both that this is the current market value and that is it the value of her capital asset not of the house. Regulation 52 operates to impose equal shares on capital jointly held, but that applies on the facts in any event. The starting point in applying regulation 49 is the decision of the Court of Appeal in Hourigan v Secretary of State for Work and Pensions, reported as R(IS) 4/03. Mrs P’s interest as joint tenant to title to her “half” of the house must be valued. That is not the same thing as her right to half the proceeds of sale of the whole house, which is the basis on which the Secretary of State acted.  

28 On valuation, I adopt the views expressed by Commissioner Jacobs in CH 3197 2003. (See also his CH 1953 2003).  These seem to me to be fully in line with the views of the deputy Commissioner in R(JSA)  1/ 02. It is the current market value of Mrs’ P’s “half” of the house sold at the date of the decision under appeal, with her husband in it as of right and not willing to buy Mrs P out or to sell either his “half” or the house as a whole (so not in the current market or cooperating with it, and acting as an encumbrance in practical if not legal terms) and with no litigation in prospect to enforce any rights against the husband. (Future rights are excluded by R(IS) 1/03 or R(IS) 1/97 in any event). 

29 That is clearly not the figure chosen by the Secretary of State. On the figure for which the secretary of state's representative argued, I note the comments of the deputy Commissioner in R(JSA) 1/ 02 that in the circumstances of that case “I do not see how a valuation of the property as a whole could be remotely reliable.” He set out in that decision various factors that needed consideration. These included both factors taken into account by the district valuer who gave evidence in that case and those not taken into account in that way. I have seen no consideration here of either set of factors. This may, for example, involve some speculation on the age and health of Mrs P and her husband. 

30 I suspect that any resultant valuation will, as in that case, not be anything remotely approaching the figure used by the decision maker acting for the Secretary of State. I have none of the evidence of the kind produced in CH 3197 2003 or required in R(JSA) 1/ 02 so am unable to take any view on overall valuation. But I also suspect that it is unlikely to be above the £16,000 capital limit that now applies and may be below the £8,000 capital limit that applied when the original decision was made. 

31 If Mrs P’s interest is as a tenant in common, then Hourigan, R(IS) 4/03, is directly relevant. On that question, as it is the less likely outcome on the facts here, I refer without further discussion to the (complex and uncertain) rules as discussed by the authors in Social Security Legislation, Volume II, in the commentary on regulation 52 at paragraphs 2.403 - 2.405 (2005 edition).  But, again, reality suggests that the current market value of Mrs P’s interest as a tenant in common not in residence is not going to be a large sum.    

Summary

32 Even if Mrs P and her husband have been estranged for some time, the question still to be answered is whether Mrs P’s interest in the house is worth more than £8,000. It is not obvious to me on the evidence before me that it is. There are real prospects that on fully found facts Mrs P’s appeal may succeed either because her interest in the house is disregarded in full, or because her interest, when valued, proves to be worth little. So the matter must go to a new tribunal.  It may help the tribunal and parties if I summarise the issues for decision and the conclusions that follow. 

33 The undisputed facts at the date of decision are that Mrs P is no longer living in the matrimonial home, but her husband is living there. They are former partners. They own it together either as joint tenants or tenants in common. There are no current plans for the house or any interest in it to be sold. There are no ongoing matrimonial proceedings, nor any in prospect. Any capital interest that Mrs P has or may have under such proceedings are to be ignored: R(IS) 1/03. The further facts to be found are:

(1) Are Mrs P and her husband separated and estranged or only separated? 
If they are estranged, is her husband living in the house as a lone parent? If not, when did the estrangement occur? When did Mrs P cease to occupy the house after that date?

If they are separated and not estranged, then Mrs P’s interest in the house is to be ignored: Schedule 10, paragraph 4. If they are estranged, then her capital value is to be ignored so long as her husband is living there as a lone parent. It is also to be ignored for 26 weeks after she moves out after the estrangement: Schedule 10, paragraph 25. The tribunal must therefore decide if the estrangement started more than 26 weeks before the claim for income support. 

(2) If Mrs P and her husband are estranged, and neither of the provisos operates, 
what is the arrangement between Mrs P and her husband about his continued occupation of the property? Is there evidence of a constructive trust or any other arrangement under which he is a tenant for life?

If the arrangements are of the kind considered in R(IS) 1/97, then the interest that Mrs P has in the house may be residual only, and she may have no current interest in the house. If so, then paragraph 5 of Schedule 10 may apply.

(3) If there is no such arrangement, are Mrs P and her husband joint tenants or tenants in common of the house? 

This knowledge is required to identify the nature of the capital asset held by Mrs P that needs to be valued. The rules for assuming the basis of valuation of her asset depend on identifying its precise legal nature. I have pointed out an easy practical way of resolving that issue. This may be knowledge that the Secretary of State should be expected to obtain, rather than the claimant, if the Secretary of State fails, as in this case, to ask the claimant the right questions at the right time.   

(4) Once the capital asset is identified, what is its current market value? 

That cannot be done in the way the Secretary of State has assumed in the decision under appeal. It is not half the net value of the resale price of the freehold property with vacant possession. It is the value of Mrs P’s half of the joint tenancy in a house still occupied by the other joint tenant, or alternatively of her tenancy in common again with the other tenant in occupation. The best answer to that may be a specific expert valuation. But that needs to be made in line with the approach discussed in R(JSA) 1/ 02. And it may be questioned whether a claimant for income support, with the most limited means, should reasonably be required to get a valuation of an asset not amenable to immediate realisation in order to make her income support claim. This again should be for the Secretary of State.   If there is no expert or other specific evidence, then the tribunal must make an informed guess to the best of its judgment on the evidence it does have. It may note the robust view taken by the deputy commissioner in R(JSA) 1/ 02 in deciding that appeal himself. The tribunal will be aware that the critical figures are the maximum and minimum capital figures for income support claim purposes. 

34 While I therefore allow the appeal by the Secretary of State, I reject some specific grounds on which the Secretary of State appealed. I also find that the decision of the decision maker acting for the Secretary of State to be erroneous on several grounds, in part because it was made in ignorance of essential facts.  The new tribunal must make a fresh decision covering the above points.
David Williams
Commissioner 
6 02 2007

[signed on the original on the date shown]