AB v SSWP and Canterbury CC (IS and HB) (Capital : Ownership/Possession) [2014] UKUT 212 (AAC) (12 May 2014)

DECISION OF THE UPPER TRIBUNAL

(ADMINISTRATIVE APPEALS CHAMBER)

The DECISION of the Upper Tribunal is to allow the appeal by the appellant.

The decision of the Margate First-tier Tribunal dated 16 January 2013 under file reference SC170/12/01180 involves an error on a point of law and is set aside.

The Appellant’s appeal against the Secretary of State’s decision dated 07 March 2012 in relation to his claim for income support is remitted to be reheard by a different First-tier Tribunal, subject to the Directions below.

This decision is given under section 12(2)(a) and 12(2)(b)(i) of the Tribunals, Courts and Enforcement Act 2007.

DIRECTIONS

The following directions apply to the re-hearing:

(1) The re-hearing will be at an oral hearing;

(2) The new tribunal should be differently constituted from the First-tier Tribunal which considered this appeal at the hearing on 16 January 2013;

(3) The new tribunal must consider all the evidence afresh and is not bound in any way by the decision of the previous tribunal;

(4) The new tribunal should also follow the guidance set out in the Reasons below.

These directions may be supplemented by later directions by a District Tribunal Judge in the Social Entitlement Chamber of the First-tier Tribunal.

DECISION OF THE UPPER TRIBUNAL

REASONS FOR DECISION

The two central themes in this appeal

1. This appeal raises two main themes which may have relevance to other cases. The first concerns the distinction between actual and notional capital. The second relates to the basis for an adverse credibility finding against a claimant.

2. The first theme is the importance of decision-makers and tribunals making a clear distinction in their findings of fact as to whether the claimant has actual or notional capital. If it is found that the claimant possesses actual capital over £16,000, that is usually the end of the matter and there is no entitlement to income support. However, if the claimant shows that he possesses capital of less than £16,000, because some of it has been spent or otherwise disposed of, it is usually necessary to consider whether he should be treated as possessing notional capital. This will require findings as to whether he has indeed deprived himself of capital, whether the purpose was to secure or increase entitlement to benefit and the sum so involved. The distinction between actual and notional capital is also important because it may affect future claims to benefit by reason of the application of the diminishing capital rule.

3. The second theme is the importance of having a proper evidential basis for an adverse credibility finding against a claimant. It may well be that as a general rule the more implausible an account is, the less likely it is to be true. However, this is at best a useful rule of thumb and not an absolute proposition. So decision makers and tribunals need to bear in mind the cautionary words of Neuberger LJ (as he then was) that often “some, even most, of the appellant’s story may seem inherently unlikely but that does not mean that it is untrue” (HK v Secretary of State for the Home Department [2006] EWCA Civ 1037 at paragraph 28). Equally, as Chadwick LJ observed in his judgment in the same case, tribunals need to be wary of rejecting an applicant’s account “simply because the facts that he describes are so unusual as to be thought unbelievable”. More particularly, this was “not a safe basis upon which to reject the existence of facts which are said to have occurred within an environment and culture which is so wholly outside the experience of the decision maker as that in the present case” (at paragraph 72). It is important to recognise that those judicial observations were made in the context of an asylum appeal. However, those statements may well have purchase in some social security appeals in a domestic context, at least where the alleged factual matrix of the case involves issues which are wholly outside the everyday experience of most tribunal judges.

4. This a tale of a drug dealer’s death, the handing over of money by an underworld figure to his partner at his funeral which was then followed by a series of threats to the woman, resulting in her changing her identity and relocating, and culminating some years later in the appearance of a gangland figure at the funeral of the woman’s father, demanding the return of the money with interest. She says that she paid off the gangsters with her share of the inheritance from her late father’s estate. The Department for Work and Pensions (DWP) did not believe her. Neither did the First-tier Tribunal (“the tribunal”).

5. The woman’s tale may or may not be true. However, what is clear is that the tribunal (i) failed to make it clear whether it found that she still had the money from her father’s inheritance; and (ii) failed adequately to explain why it did not accept her account of the gangland threats. The tribunal’s decision accordingly involves an error of law. I therefore allow the Appellant’s appeal to the Upper Tribunal and also set aside the tribunal’s decision. There will need to be a re-hearing before a fresh tribunal.

6. Simply because this appeal to the Upper Tribunal has succeeded on the law does not necessarily mean that the Appellant will win at the re-hearing before a new tribunal on the facts. It all depends on the findings of fact that the new tribunal makes in the light of the relevant law and on the evidence before it.

The facts that are not in dispute

7. The Appellant in this appeal (‘Mr B’) is the new partner of the woman (‘Mrs B’) whose account is summarised above. Mr Graham Tegg, Solicitor at Kent Law Clinic and the Appellant’s representative, helpfully acknowledges that certain facts were not in dispute before the tribunal. These were that in July 2010 Mrs B received two interim payments from her late father’s estate, amounting to nearly £13,000, followed by a final payment of nearly £53,000 in December 2010. It was also accepted that in July 2010 the couple had bought a new car for £10,700 and that they had withdrawn £52,500 in cash in January 2011. Mr Tegg further conceded that Mr B had not advised either the DWP (which was paying him income support) or the local authority (which was paying him housing benefit) about the inheritance payments received by his wife.

The first instance decision making history in the case

8. Mr B had been in receipt of housing benefit and council tax benefit from March 2006. In April 2010 he was awarded income support (on grounds of incapacity for work) for himself, Mrs B and their four children. The DWP received information that they had undisclosed capital and interviewed them separately under caution in January 2012.

9. On 7 March 2012 the DWP decision maker superseded the April 2010 income support award on the basis that from 4 January 2011 Mr B had capital in excess of the upper limit and so was not entitled to benefit from that date. The award was also superseded and reduced for an earlier period on the basis that he had capital in excess of the lower limit such that tariff income fell to be taken into account. The appellant was notified of the decision and the resulting overpayment on 22 March 2012. Mr B lodged an appeal, arguing that he did not possess any savings or other capital. The entitlement decision has become Upper Tribunal appeal CIS/2411/2013.

10. On 3 April 2012 the local authority likewise decided that Mr B was not entitled to either housing benefit or council tax benefit as from 4 January 2011, and that the resulting overpayments were recoverable from the Appellant. Mr B again appealed, asserting that the money which had been in his wife’s account had been paid out after a very brief period and so was no longer held. The housing benefit decision has become Upper Tribunal appeal CH/2413/2013.

The First-tier Tribunal’s decision

11. The tribunal in Margate heard oral evidence from both Mr and Mrs B at a hearing on 16 January 2013. The tribunal dismissed the Appellant’s appeal, confirming the DWP and local authority’s decisions. The tribunal’s decision notice on the income support appeal recorded that Mr B was not entitled to income support for the relevant period “because his partner possessed capital in excess of the upper limit”. A similar decision notice was issued by the tribunal on the housing benefit appeal.

12. The tribunal also provided a (sensibly) combined statement of reasons for the two appeals. At the outset the tribunal judge indicated that he was “not persuaded that [Mr & Mrs B] had an entirely strict regard for the truth” (statement of reasons at paragraph [4]). Referring to the DWP decision under appeal, the tribunal noted that the decision maker had not regarded the purchase of the car as a deprivation of capital. However, “the Appellant would be treated as if he (or, rather, his partner) were still in possession of the £52,500” (at paragraph [7]). The tribunal judge then considered Mrs B’s account of the threats made to her (at paragraphs [8]-[20]). He finished by noting the DWP submission on the appeal to the effect that “claims to have used capital to repay debt without proof must be given the closest scrutiny” (a reference to Social Security Commissioner’s reported decisions R(SB) 12/91 and R(SB) 38/85). The tribunal then concluded as follows:

“There is no documentary evidence in this case to establish what has happened to the £52,500. Some particulars have been given in the oral evidence, but aspects of it are, frankly, incredible. It seems to me inevitable in these circumstances that the Appellant should be deemed to still have, through his partner, capital in excess of the upper limit of £16,000, and on that footing I refuse the appeals and confirm the decisions of the Secretary of State and Canterbury City Council rehearsed at the start of this statement of reasons.”

13. The District Tribunal Judge subsequently refused an application for permission to appeal, ruling that the matters raised by the application were all issues of fact for determination by the tribunal.

The proceedings before the Upper Tribunal

14. I subsequently gave permission to appeal, but not on all of the grounds advanced by Mr Tegg on behalf of the Appellant.

15. First, I suggested that it was arguably not sufficiently clear from the tribunal’s statement of reasons whether it had found that the Appellant (i) still held the £52,500 in some form, or alternatively (ii) he had deprived himself of it for the purpose of obtaining benefit such as to be fixed with notional capital.

16. Second, I indicated that it might be arguable that the tribunal’s fact finding was not sufficiently clear and precise as regards credibility issues. In particular, comments in the statement of reasons suggested that the tribunal did not pay sufficiently careful attention to the evidence in reaching its conclusion about the plausibility of the account presented by Mr & Mrs B.

17. Mr G T Overrill has provided a written submission on behalf of the Secretary of State. He deals only with the first point identified above. He argues that the tribunal failed to make a clear finding as to whether the couple still possessed the £52,500 as actual capital or whether it had been disposed of, in which case the issues around notional capital would need to be resolved. On that basis he supports the appeal to the Upper Tribunal and proposes that the matter is remitted for a fresh hearing before a different tribunal.

18. Mrs S Price, the local authority’s representative, believes that the tribunal found that the appellant and his wife still had the capital in question, but accepts that the “unfortunate use of the word ‘deemed’ in the statement of reasons leaves the decision open to ambiguity”. On that basis she supports the Secretary of State’s proposal to allow the appeal, set the decision aside and send the case back for rehearing.

The Upper Tribunal’s analysis

Introduction

19. This matter could be dealt with by way of a decision without reasons, or with very short reasons, as it is supported by both the Secretary of State and the local authority. However, the difficulty of the issues means that in my view full reasons are appropriate.

Actual or notional capital?

20. The income support decision maker’s decision and explanatory letter make it clear that the DWP did not believe the Appellant’s account. The local authority arrived at the same decision. The tribunal’s decision notices are clear that it saw itself as confirming those decisions. In other words, the tribunal seems to have decided that Mr & Mrs B still had the £52,500. The tale about paying off gangsters was simply (although it was not quite described as such) a cock-and-bull story (on which see further below).

21. I agree with all the representatives that the ambiguity inherent in the use of the term “deemed” in the statement of reasons casts doubt as to whether the conclusion recorded in the decision notice accurately reflected the tribunal’s reasoning. Thus the use of the words “treated as” in paragraph [7] of the statement of reasons (see paragraph 12 above) clearly points towards a finding of notional capital. Although the decision maker’s original decision may be tolerably clear, the DWP’s written submission to the tribunal referred to the Appellant being “treated as still in possession of the capital namely £52,000”, which may be partially responsible for the ambiguity in the statement of reasons.

22. The tribunal’s further reference to “deemed” in paragraph [21] of the statement of reasons is significant in that it implies that the tribunal’s decision related to notional rather than actual capital (see CIS/922/2010 at paragraph 14, per Judge Whybrow). I accept that it is possible that the term “deemed” was intended to refer to the fact that the capital belonged to Mrs B, rather than the Appellant himself (and so was treated as his capital by virtue of section 136(1) of the Social Security Contributions and Benefits Act 1992). However, given that the statement of reasons nowhere records a clear finding as to whether the capital was still actually held, the issue regarding ambiguity stands regardless.

23. On the facts of the present case the receipt of the inheritance monies was not in dispute. The onus accordingly shifted to the Appellant to show that he (or rather Mrs B) no longer possessed that capital (see R(SB) 38/85 at paragraph 18). Both the DWP decision maker and the tribunal were much exercised by the absence of documentary evidence to support the Appellant’s account. There are echoes in the DWP’s submission and the tribunal’s statement of reasons of the warning by Mr Commissioner Rice in R(SB) 12/91 (at paragraph 11) that:

“It cannot be over-emphasised that bland allegations of this nature, unsupported by any documentation or any particularity, should be approached with grave suspicion.”

24. However, neither the decision maker nor the tribunal acknowledged that there was no dispute in R(SB) 12/91 that the claimant in that case had given the capital to his daughters; rather, the issue there was whether the payments were gifts on his part or the repayment of loans. Thus Mr Commissioner Rice’s warning was espoused in the context of determining whether deprivation of capital had occurred so as to give rise to notional capital, not in the context of establishing whether the actual capital was still held. That said, Mr Commissioner Hallett’s earlier decision in R(SB) 38/85 (at paragraph 19) certainly counsels the need for “careful investigation” of the claimant’s account that he no longer held capital because it had been used to repay loans. Thus the Commissioner held as follows (at paragraph 18):

“The claimant says that he expended this sum of £18,700 in repaying loans. It is for him to prove that this is so. Failing a satisfactory account of the way in which the money has been disposed of, it will be open to the tribunal, and a natural conclusion, to find that the claimant still has, in some form or other, that resource and consequently to conclude that his actual resources are above the prescribed limit.”

25. In many cases such a “satisfactory account” will require the production of contemporary documentation, including written loan agreements and receipts. But there is no rule of law that documentary evidence is required. This is because the kind of confirmatory evidence that is available will always be context specific. If I say that my bank owes me money, I should be able to produce bank statements, paying in slips or correspondence to that effect. But paperwork will not always be available or even expected. For example, in KW v Secretary of State for Work and Pensions [2012] UKUT 350 (AAC) the claimant, who had a personality disorder, managed to spend approximately £30,000 of his inheritance in less than four months. He provided very little documentary evidence as to how that money was spent. However, he said that he spent up to £100 a day in cash on sexual services, for which (unsurprisingly) he had no receipts. I allowed his appeal to the Upper Tribunal on another ground, but observed as follows:

“11. The fact that expenditure is remarkable does not mean that it did not happen. The new tribunal will have to form its own judgment on that issue (and indeed the other matters in dispute). I am not entirely sure what the decision maker is suggesting by stating that the appellant’s explanation was “simply too vague”. He does not appear to have been asked for further and better particulars. The tribunal will have to decide for itself whether some of the money was spent in the way described and, if so, approximately how much. The burden, of course, is on the appellant to show on the balance of probabilities that such expenditure took place. The absence of any receipts is certainly not conclusive of the matter, especially given the nature of the alleged expenditure.”

26. Those comments were based on the assumption that sex workers do not typically provide receipts. I think we can be even more confident that underworld gangsters do not provide written receipts for debts that have been paid off. This takes us to the second issue on this appeal, the question of credibility. Although the Secretary of State and local authority representatives have not addressed this ground, some comments are in order to assist the next tribunal.

An unlikely story?

27. At this point it is necessary to refer to two other individuals. These are Mr X, Mrs B’s former partner, who made his living as a drug dealer, and Mr H (a former associate of either Mr X or Mrs B). The Appellant and his wife were not represented before the tribunal and did not put in a coherent (or indeed any) written submission setting out their case. As litigants in person often do, they simply turned up with some papers and told their story. The summary at paragraph 4 above of the Appellant’s account may well sound like the plot line for a TV crime drama. However, putting together the pieces of evidence on file, their account in chronological terms is essentially as follows. For the benefit of the next tribunal, where there is documentary evidence on file that refers to the claims made, the relevant page references are included in parentheses (IUC = interview under caution, RoP = tribunal’s record of proceedings).

28. The story begins on an unknown date in 1998 (other events are referred to simply by month).

(1) 1998 Mr X died in a road traffic accident. Mrs B was 25, living with

Mr X’s family, including his 3 children from a previous relationship. At Mr X’s funeral his associates hand Mrs B some money - “it was like, er, a naughty handshake thing, you look after each other’s family.. that was to help with everything, bills, payments ... and then when you get myself straight and sorted you pay it back” (IUC, pp.70-72, RoP, p.113). Mrs B gave the money (or some of it) to her stepson to hide.

(2) 09 1998 Mrs B fell out with Mr X’s family and moved with her 2 year

old son to live with her father. Her step-son retained some or all of the money received at the funeral (IUC p.71, RoP pp.113-114).

(3) 10 1998 Mrs B’s car was attacked while living with her father so she

moved to her own flat in Surrey (IUC p.71, RoP p.114). Mrs B also received a letter from Mr H saying he would set fire to her flat with her and her son in it if she did not give him £5,000 [it is unclear whether this was a separate blackmail, or whether Mr H was one of those who had given Mrs B money at the funeral and was demanding repayment] (IUC p.71, police report pp.96-97, RoP p.114).

(4) 03 1999 Mrs B interviewed by police in relation to admissions made by

her (apparently in respect of possible drug-related offences) in interview regarding Mr H’s alleged blackmail (police report pp.102-103).

(5) 05 1999 CPS decided not to prosecute Mrs B as insufficient evidence

(police report p.102). However, Mr H was charged with blackmail of Mrs B and bailed (police report p.97).

(6) 11 1999 Mrs B called 999, reported to police that a man who knew her

from her past had come to her flat on behalf of Mr H to offer her £1,500 if she would drop the case against him. He also threatened her. Recorded by police as a possible attempt to pervert the course of justice (police report pp.89-90).

(7) 12 1999 Mrs B asked police to delay making any arrest for Nov 1999

incident until she had been able to move away from the area (police report pp.92-93). Council housing department recommended Mrs B as suitable for re-housing due to threats (council reports and letter, pp.104-107).

(8) 01 2000 Mr & Mrs B moved to Kent, Mrs B changed name under

police protection scheme (IUC, p.72). Mr H found not guilty of blackmail (police report p.97).

(9) 05 2000 Mrs B informed police she did not want to pursue allegation

for attempting to pervert course of justice as she had not experienced further problems since moving out of the area, and wanted to put it behind her (police report p.94).

(10) 04 2010 Mrs B’s father died; at the funeral Mrs B was approached by

a stranger demanding repayment of alleged debt of £60,000. Two days later someone came to Mr & Mrs B’s home in Kent demanding repayment of the debt. This was followed by series of 5 or 6 further visits. Mr & Mrs B did not report these to the police (IUC p.72, RoP pp.117-120).

(11) 07 2010 TB received payment of £10,700 as part of inheritance; sum

withdrawn to buy family car (RoP p.109).

(12) 12 2010 Inheritance of £52,000 received in Mrs B’s account (RoP

p.119).

(13) 01 2011 £52,000 withdrawn in cash to repay alleged debt (person

came to Mr & Mrs B’s home to collect).

29. Overall, and as already noted, the tribunal did not find the Appellant’s account credible. However, what did the tribunal make of the specific incidents related above?

30. First, the tribunal referred to the alleged incident at the funeral in 1998 (incident (1)), but then stated that “nothing more occurred until 2010” when Mrs B’s father died, so proceeding directly in the tribunal’s narrative from incident (1) to incident (10) above (statement of reasons at [13]). The tribunal further reasoned as follows (statement of reasons at [19]):

“19. What I think does make one stretch one’s eyes, however, is the notion that twelve years later history repeats itself with someone wholly unconnected with the original blackmailer also supposing that this otherwise unremarkable lady [Mrs B] has lots of money and is prepared to make death threats to get it.”

31. Credibility findings, of course, are ultimately a matter for the fact-finding tribunal. However, this finding was based on the tribunal fundamentally misunderstanding the case being put by the Appellant - Mr & Mrs B were not asserting that there had been two similar, but entirely unrelated, incidents in 1998 and 2010, but rather that they were closely connected. In short, a debt was allegedly being called in.

32. Second, the tribunal initially referred to the alleged blackmail attempt in 1998 in rather doubtful terms: “The tribunal attempted, unsuccessfully, to establish a motive. They asked what had become of the letter and were told that the Police had it” (statement of reasons at [10]). However, the tribunal then rather grudgingly accepted that the police and council documentary evidence confirmed that it had been treated as a genuine threat (statement of reasons at [11]), even if Mr H was subsequently acquitted. I simply interpose that, given those criminal proceedings, it was hardly likely that Mrs B would have been able to produce the 1998 blackmail letter for the tribunal in 2013. The tribunal, however, continued to question the credibility of the account: “Mr and Mrs B were unable to explain to me why [Mr H] acted as he did, that is to demand money with menaces from a cleaner [i.e. Mrs B], save that he apparently thought she had ‘a lot of money’. What the basis for his belief was unclear” (statement of reasons at [18]).

33. The tribunal’s scepticism about the basis for the original demand with menaces in 1998 is puzzling, given the clear evidence that (i) Mrs B’s former partner Mr X was involved in drug-dealing; (ii) she also appeared to have been investigated for drugs related offences at the time (see incident (4)); and (iii) Mrs B’s account of the money being handed over at Mr X’s funeral. Any one of those matters would surely provide an obvious motive.

34. Third, the tribunal plainly found the purchase of the car (incident (11) above) to be the “most telling point” against the credibility of the Appellant’s account (statement of reasons at [20]):

“At the father’s funeral threats were made to recover the £12,000 which had swollen to £60,000, followed by regular visits to the home to show that they meant business. Notwithstanding the terrifying effect such a demand would have, three months later, when a substantial sum comes into their hands, Mr and Mrs B use it not to buy time, or perhaps even to resolve the matter, but to buy a car. That strikes me as wholly implausible.”

35. I accept that there is considerable force in that assessment. However, the tribunal do not address the explanation which the Appellant gave. In her interview under caution, Mrs B told investigators that she had promised her father she would buy a car as they were a family of 6 and they could not all go and see him when he was dying (“my kids never got to say goodbye to him properly”, interview under caution at p.70). Her explanation might be seen as maudlin, but it was an explanation which the tribunal had to assess. There is no evidence that it did.

36. I do not doubt the difficulties facing the tribunal on this appeal. The account of the Appellant and his wife came out in dribs and drabs, with much of the documentary evidence only being produced on the day. However, the analysis above shows that the Appellant’s story was not as inherently and fundamentally implausible as the tribunal found it to be. The tribunal’s misgivings about, and grudging acceptance of, the 1998 blackmail attempt are simply not borne out by the evidence. For example, a CID officer was recorded as having confirmed to the council’s homeless persons unit in 1999 that “he does not feel this situation will be resolved with the court case and the threat will remain after the case has been concluded” (p.106). Moreover, the tribunal misunderstood the admittedly rather confused case that the Appellant was seeking to make. If the tribunal had appreciated that the Appellant was not asserting that there had been two similar, but entirely unrelated, incidents in 1998 and 2010, it might have recognised the Appellant’s account as at least internally consistent on the crucial issues, and potentially plausible (whether or not it went on to decide on the balance of probabilities that the account was untrue).

37. I accept, of course, that an appellate court or tribunal “should, in principle, be very reluctant to interfere with a decision of a tribunal, which turns purely on fact or inference from fact” (HK v Secretary of State for the Home Department at paragraph 48 per Neuberger LJ). As Neuberger LJ also observed (at paragraph 45):

“Where a fact-finding tribunal has decided to reject evidence for a number of reasons, the mere fact that some of those reasons do not bear analysis is not, of itself, enough to justify an appellate court setting the decision aside. In such a case, the appellate court has to decide whether it would be just to let the tribunal’s decision stand. That question will normally be answered by considering whether one can be tolerably confident that the tribunal’s decision would have been the same on the basis of the reasons which have survived its scrutiny.”

38. In this case I can allow the appeal in any event on the ambiguity over the issue of actual or notional capital. However, there are sufficient doubts about the tribunal’s credibility findings in the very unusual circumstances of this case to satisfy me that I cannot be “tolerably confident” the tribunal’s decision would have survived in any event. I therefore also allow the appeal on this second ground.

39. In doing so, I am not suggesting that the new tribunal is in any way bound to find that the Appellant’s account of events is genuine. I do not doubt that there are some points of confusion and possible contradiction in the evidence of Mr and Mrs B. For example, Mrs B said in her interview under caution that she had been given £50,000 by Mr X’s drug-dealing associates (p.71), whereas in oral evidence to the tribunal Mr B appeared to give the figure of £12,000. In addition, and also in the interview under caution (at p.71), Mrs B implied that the threat of her property being burned down in 1998 (which she had reported to the police and which led to her being re-housed, and which at the time she alleged came from Mr H) in fact came from the drugs associates and related to the money given to her at the funeral. However, elsewhere in the papers (e.g. pp.72 and 114) she suggested that the threat received in 1998 was a separate blackmail attempt by Mr H, and did not relate to the alleged debt arising from the money given to her at Mr X’s funeral. These, along with other matters, are issues which the new tribunal may have to resolve.

Conclusion

40. For the reasons explained above, the decision of the First-tier Tribunal involves an error of law. I therefore allow the appeal, set aside the tribunal’s decision and direct a re-hearing before a new tribunal, which should follow the directions and guidance above (Tribunals, Courts and Enforcement Act 2007, section 12(2)(a) and 12(2)(b)(i)).

Signed on the original Nicholas Wikeley

on 12 May 2014 Judge of the Upper Tribunal

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Upper Tribunal (Administrative Appeals Chamber)

Conclusion