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[2004] UKSSCSC CIS_4269_2003 (06 September 2004)

THE SOCIAL SECURITY COMMISSIONERSError! Reference source not found.

Commissioner's Case No: CIS/4269/2003

SOCIAL SECURITY CONTRIBUTIONS AND BENEFITS ACT 1992

SOCIAL SECURITY ACT 1998

APPEAL FROM A DECISION OF AN APPEAL TRIBUNAL

ON A QUESTION OF LAW

DECISION OF THE SOCIAL SECURITY COMMISSIONER

COMMISSIONER: MR J MESHER

Claimant:

Tribunal: Dorchester

Tribunal Case No:

Date of tribunal hearing: 24 June 2003

DECISION OF THE SOCIAL SECURITY COMMISSIONER

1. The claimant's appeal to the Commissioner is allowed. The decision of the Dorchester appeal tribunal dated 24 June 2003 is erroneous in point of law, for the reason given below, and I set it aside. It is expedient for me to substitute a decision on the claimant's appeal having made the necessary findings of fact (Social Security Act 1998, section 14(8)(a)(ii)). My decision is to allow the appeal and to give the decision that the Secretary of State's decision dated 16 August 2002, awarding income support from and including 2 August 2002, does not fall to be revised or superseded. Accordingly, no overpayment of income support was made to the claimant for the period from 2 August 2002 to 11 September 2002, so that there is no question of any amount being recoverable from him under section 71 of the Social Security Administration Act 1992.
2. The representative of the Secretary of State, in the submission dated 18 December 2003, supported this appeal to the Commissioner and submitted that I should substitute a decision entirely in the claimant's favour. However, after doing some arithmetic, I had doubts about whether I could substitute such a decision, which doubts I set out in a direction. In a further submission dated 18 February 2004, the representative of the Secretary of State submitted that the claimant should be found to have capital during the period in question in excess of the level at which tariff income has to be calculated (£6,000), but not in excess of the level at which entitlement to income support is completely removed for a person of his age (£12,000). The claimant has made further detailed comments and given further information about the relevant transactions. Following consideration of those comments, I issued another direction asking whether the claimant's capital should be regarded as having included an amount held on trust for his mother, so that his capital was below the level at which tariff income is to be assumed. In the further submission dated 11 May 2004, the representative of the Secretary of State agreed that that was the case. Unfortunately, there has been quite a delay in the file's being referred back to me after the claimant made no comments on the further submission in the time allowed to him.
3. The claimant was awarded income support from and including 2 August 2002 in a decision made on 16 August 2002. He was then living with his 90-year-old mother in a "park home" in Weymouth. He and his mother had been living in a house in Andover, which was sold for £139,950 in June 2002 as they had decided to move to Weymouth. The claimant and his mother were at one time joint owners of that house, but there is in the papers a declaration of trust dated 30 October 2001 recording that his mother had given him her equitable interest in the property and declaring that the two of them held the property in trust for the claimant absolutely. I propose to take that declaration of trust at face value, despite later actions by the claimant suggesting that he regarded his mother as still having some rights to a share of the proceeds of sale. I am not concerned in this case with the effects of the declaration of trust on the claimant's mother's own entitlement to income support or to any other income-related benefit.
4. The appeal tribunal did not know the exact amount of the net proceeds of sale of the Andover house, after fees and expenses, but the claimant has stated clearly and consistently that £37,000 out of the proceeds was immediately used for the purpose described below. The remainder, £99,950, was paid into a building society account in the claimant's name. As found by the appeal tribunal, because close to the completion date for the sale the claimant had not found anywhere suitable in Weymouth, the park home was bought in June 2002 for £65,000. This was put in the claimant's mother's sole name, but the funds came partly from the claimant's own savings (£28,000) and partly from the proceeds of sale of the Andover house (£37,000), ignoring the complication of a small loan having to have been obtained to cover advance deposits. As found by the appeal tribunal (acknowledging that the claimant does not agree with many of its findings) this was not from the outset a purely transitional arrangement. However, after a very short time it became clear that the park home was unsuitable, particularly for the claimant's mother. They looked for a suitable bungalow in Weymouth and had an offer of £165,000 accepted for one in mid-July 2002. The claimant said in a letter of 24 September 2002 (page 37) that at that point he had savings of £108,000 in addition to the £65,000 tied up in the park home, so obtained a mortgage of £59,000 from a building society. He sent £106,000 to his solicitors at the end of July 2002, so as to be sure that all the necessary funds would be available for completion. Completion was on 12 September 2002. Fees of £2,000 or so were paid to the claimant's solicitor at the end of August 2002.
5. On the claim form signed on 9 August 2002 the claimant declared that he had no savings or investments. That was the basis on which income support was awarded. After the claimant had reported his change of address to the bungalow in Weymouth, further investigations brought to light more or less the information set out above. In a decision on a date which is not clear it was apparently decided that the claimant was not entitled to income support for the period from 2 August 2002 to 11 September 2002 because the amount of his capital exceeded the statutory limit of £12,000. There is a lack of clarity because section 5 of the Secretary of State's written submission to the appeal tribunal said that that decision was made on 13 January 2003, but the transcription in section 3 of the submission of the overpayment recoverability decision of 13 January 2003 referred to the overpayment of £471.50 for the period from 2 August 2002 to 11 September 2002 having arisen from a decision dated 18 November 2002. There are no copies of any original decisions in the papers, but a letter of explanation to the claimant, dated 22 January 2003, about the suspension of payment of benefit in October 2002 and subsequent payment of five weeks' benefit in November 2002 says that a decision on entitlement for the period from 2 August 2002 to 11 September 2002 was made on 14 November 2002.
6. The claimant appealed against the decision of 13 January 2003. As the main point raised was that the proceeds of sale of the Andover house should be disregarded as capital under the rule about proceeds of sale earmarked for the purchase of another home, it is plain that the appeal was against both the decision taking away entitlement to income support and the decision on overpayment recoverability. It has properly been treated in that way. The Secretary of State's submission to the appeal tribunal was that the disregard rule in paragraph 3 of Schedule 10 to the Income Support (General) Regulations 1987 could not apply as, when the park home was bought, there was not an intention to keep aside the remainder of the proceeds of sale of the Andover house to buy a new home. It was also submitted that the £106,000 sent to the claimant's solicitors remained actual capital of the claimant.
7. Paragraph 3 of Schedule 10 requires the disregarding of:

"Any sum directly attributable to the proceeds of sale of any premises formerly occupied 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 the date of sale or such longer period as is reasonable in the circumstances to enable the claimant to complete the purchase."

8. The appeal tribunal dismissed the appeal. It decided that the claimant was not entitled to income support for the period in question and that the resulting overpayment was recoverable from him. On the effect of paragraph 3 of Schedule 10 it said this in its statement of reasons:

"The tribunal having regard to the facts found and the history of sales and purchases set out above adopted as persuasive the reasoning of the decision maker set out at paragraph 8 of the submission page 6 and explained at page 7, paragraph 14. The appellant could not properly rely upon the protection of that paragraph as once the appellant had purchased a home for himself and his mother the protection afforded by that paragraph no longer applied and the money held in his solicitors account was no longer to be treated as a `sum directly attributable to the proceeds of sale of any premises formerly occupied by the claimant as his home'; the property formerly occupied by the appellant as his home when he came to purchase the [bungalow] was the Park property. For the reasons given above the tribunal determined that the subsequent decision to purchase [the bungalow] was not part of an associated transaction that might entitle the appellant to rely upon the protection of Sch 10 para 3."

9. The claimant now appeals against that decision with my leave. In the submission of 18 December 2003, the representative of the Secretary of State said this:

"8. I submit that there is nothing in paragraph 3 [of Schedule 10] that says that the formerly occupied property must be the one occupied immediately before the property for which the capital is intended. The capital in question at the time of the claim was the proceeds of claimant's former home and was intended for the purchase of another home within 26 weeks. I submit that the capital satisfies the provisions of paragraph 3 and therefore should have been disregarded.

9. It is open to debate whether or not the claimant intended to stay in the mobile home or whether it was a temporary measure. If his initial intention on 12/6/02 was to stay, his capital at that time would not have been intended for the purchase of another property and could not be disregarded for the purpose of income support. However, he didn't claim income support until 2/8/02. By that time his capital had been paid over to his solicitor for the purchase of the bungalow in Weymouth so although the capital still belonged to the claimant there was a clear intention to use it, along with the proceeds from the mobile home, for the purchase of another more suitable home."

10. I agree with the substance of those points. It is not necessarily fatal to the application of paragraph 3 that a claimant who has a sum directly attributable to the proceeds of sale of home A is currently living in home B, providing that the condition that the sum is to be used to purchase home C within 26 weeks (or reasonable longer period) of the sale of home A is met. It will be a relatively rare case in which all those conditions can be met. However, the present case is one in which they could be met, at least in relation to part of the proceeds of sale of the Andover house. Thus the appeal tribunal erred in law in adopting a wrong legal interpretation of paragraph 3. It was wrong in law for the appeal tribunal to say that once the park home had been bought, none of the capital possessed by the claimant could be said to be directly attributable to the proceeds of sale of the Andover house.
11. That error of law requires me to set aside the appeal tribunal's decision. However, the application of the correct legal interpretation of paragraph 3 of Schedule 10 does not necessarily get the claimant completely home and dry. The precise circumstances of the case must be looked at carefully. In view of the further information and submissions which I have had I conclude that I am in a position to do that and to give the decision on the claimant's appeal against the Secretary of State's decisions of 13 January 2003 and of 16 August 2002 as revised on 14 or 18 November 2002.
12. As indicated above, I regard the claimant's appeal as against both the decision on entitlement for the period from 2 August 2002 to 11 September 2002 (technically, the decision of 16 August 2002 as revised) and the decision on the recoverability of the resulting overpayment. On the history, I consider it most likely that the revision of the former decision was carried out on 14 or 18 November 2002, but I am not satisfied that the result was notified to the claimant at the time. I proceed on the basis that the effect of the revision was not notified to the claimant until the decision of 13 January 2003 was notified, so that his appeal was in time in relation to both decisions. Without going into any possible legal complications, I also proceed on the basis that on such an appeal against both decisions, the appeal tribunal (and the Commissioner) may in carrying out a complete rehearing put right any defects that might have existed in the revision of the decision on entitlement and may consider potential entitlement for the whole of the period for which the Secretary of State's revision made an alteration to the award under the original decision.
13. The decision on entitlement is the important one in the present case. The first question is whether the decision, made it seems on 16 August 2002, that the claimant was entitled to income support at the weekly rate of £80.50 from and including 2 August 2002 should be revised on the ground that it was made in ignorance of a material fact and as a result more advantageous to the claimant than it would otherwise have been. There is no doubt that on 16 August 2002 the Secretary of State was ignorant of the extent of the claimant's capital and that that was a material fact, regardless of the question of whether some or all of the capital fell to be disregarded. So the next question is whether taking into account those facts leads to a different result from that under the original decision of 16 August 2002, so as to justify a revision of that decision.
14. On that question, I look first at the amount of capital possessed by the claimant on 2 August 2002 and through the period down to 11 September 2002. By 2 August 2002 the claimant had sent £106,000 to his solicitors and the cheque had been paid into an account of the solicitors, which would have had to be a clients' account. On the basis that all of the £106,000 had been part of his own capital resources, the claimant thought that once it had been paid to the solicitor for the particular earmarked purpose of purchasing the Weymouth bungalow it ceased to count as part of his capital resources. He has argued that the circumstances of Thomas v Chief Adjudication Officer, reported as R(SB) 17/87, were significantly different from the circumstances of his case. I reject that argument. The Court of Appeal in Thomas decided that possession of a sum of money by a solicitor as the agent for a claimant was in every sense possession by the claimant. That principle applies to the money held by the claimant's solicitor in the present case and it does not matter that in Thomas the money was derived from the settlement of a claim for damages for a personal injury. The money in the present case remained the claimant's: he could have demanded at any time before the date of completion of the purchase of the Weymouth bungalow that it be paid to him immediately. Nor does it matter that the money was earmarked by him for a particular purpose. In so far as the £106,000 was the claimant's capital, its nature did not change by being held in the solicitor's clients' account.
15. In the letter of 24 September 2002 the claimant stated that his total funds in June/July 2002 were £108,000. I think that the extra £2,000 was represented by the fees and costs that would have to be paid to his solicitors before completion on the Weymouth bungalow, and which turned out to come to £2,194.15. Unfortunately, the page of the current account statement covering the period from 14 July 2002 to 28 August 2002 is missing from the papers before me (possibly the fault of the Department). After the £2,194.15 came out of the account on 29 August 2002 the balance was £441.24. The balance on 13 July 2002 was £6,457.79 (see page 44), but there had been a payment-in of £5,000.92 on 8 July 2002. When the claimant first produced those statements, he had marked the £5,000.92 as (if I can read the photocopy) "my mother's donation to purchase of bungalow from repairs and emergency fund". In his letters dated 5 February 2004 and 5 March 2004 the claimant has stated absolutely clearly that his mother provided that sum (although on 5 February 2004 it was said to be £5,500) as a contribution towards the purchase of the Weymouth bungalow, and that it was needed to make up the sum of £106,000 sent to the solicitor at the end of July 2002. A letter dated 5 March 2004 from the claimant's mother confirms the payment of £5,000 for that purpose. I am sure that the claimant's view is that all that had been clear from the outset, but there is a difference between what was clear to him and what had been made clear to outsiders with no other knowledge of the circumstances.
16. In my direction of 23 April 2004 I asked the following questions:

"Can it therefore be argued that the payment of £5,000.92, marked on page 44 as from the claimant's mother (although not all of what was written is legible on the photocopy), was not a gift to the claimant or a voluntary payment which would then count as part of his capital, but was a payment made for a particular purpose (the purchase of the Weymouth bungalow) such as to give rise to a trust under the principles of Barclays Bank Ltd v Quistclose Investments Ltd [1970] AC 567? Is there sufficient evidence in the present case to reach such a conclusion in a domestic context (bearing in mind the amount of benefit at stake and the costs of further investigations)? If the claimant held the £5,000 or so on trust to be used for that particular purpose or to be returned to his mother if the purpose fell through, it would not be part of his capital. The amount of his actual capital remaining after the agreed disregards would then seem to have fallen below the level at which tariff income would be generated."

17. The Secretary of State's answer in the further submission of 11 May 2004 was that there was no reason to doubt the claimant's and his mother's statements and that on the Quistclose principle the £5,000 was at the date of claim held by the claimant on trust for the particular purpose of the purchase of the Weymouth bungalow, to be returned to his mother if that purchase had fallen through. Therefore, that amount did not form part of the claimant's capital. I agree. Accordingly, the amount of capital possessed by the claimant at the date of claim down to the date of completion of the purchase was, using round figures, £103,000 (£108,000 - £5,000).
18. I must then apply paragraph 3 of Schedule 10 to the Income Support Regulations as properly understood (see paragraphs 9 and 10 above). At the relevant dates, the claimant still had £99,950 remaining from the proceeds of sale of the Andover house, after the use of £37,000 towards the purchase of the park home. In my judgment, once the £37,000 was used for that purpose it ceased to be part of a "sum" which could be disregarded under paragraph 3 of Schedule 10, nor could any part of the value of the park home be disregarded under paragraph 3. All of the remaining amount of £99,950 falls to be disregarded under paragraph 3. It was directly attributable to the proceeds of sale of the claimant's former home in Andover. It was at the date of claim to be used for the purchase of a new home, the Weymouth bungalow, within the period of 26 weeks from the date of the sale of the previous home in June 2002. Thus all the conditions of paragraph 3, as properly understood, were met. That leaves no more than £3,050 actual capital of the claimant to be taken into account. That is below the amount at which capital precludes entitlement and, by virtue of regulation 53(1ZA) of the Income Support Regulations, does not produce any tariff income for a person of the claimant's age. Only capital over £6,000 has that effect.
19. A potential argument could be raised about notional capital, on the basis that the claimant had deprived himself of £28,000 actual capital from his savings and £37,000 from the proceeds of sale of the Andover house in the purchase of the park home in his mother's sole name. Giving effect as I have done to the declaration of trust of 30 October 2001 has the result that the entire proceeds of sale of the Andover house belonged to the claimant. It might then have been argued that the claimant was, under regulation 51(1) of the Income Support Regulations, to be treated as still possessing the capital because there was an intention to secure entitlement to income support. However, in the submission of 18 December 2003 the representative of the Secretary of State disclaimed any argument along those lines. It was accepted that the claimant had throughout acted solely with the intention of finding somewhere suitable for his mother and him to live and did not have the intention necessary for the operation of regulation 51(1). I agree and conclude that there is no notional capital under regulation 51(1).
20. For legal completeness I add that, if it were to be argued that the claimant was the beneficial owner of the park home, having provided the entire purchase price, the capital value of the park home would be disregarded for income support purposes as at the relevant dates it was the claimant's home (Income Support Regulations, Schedule 10, paragraph 1).
21. Accordingly, my conclusion is that the taking into account the material facts of which the Secretary of State was ignorant on 16 August 2002 does not make any difference to the claimant's entitlement to income support at the weekly rate of £80.50 from and including 2 August 2002. That decision is therefore not to be revised, with the result that there was no overpayment for the period from 2 August 2002 to 11 September 2002 and no question of recoverability arises.

(Signed) J Mesher

Commissioner

Date: 6 September 2004