GS-v-Department for Social Development (IS) [2012] NICom 284
Decision Nos:  C3/11-12(IS)  C4/11-12(IS)

SOCIAL SECURITY ADMINISTRATION (NORTHERN IRELAND) ACT 1992

SOCIAL SECURITY (NORTHERN IRELAND) ORDER 1998

INCOME SUPPORT

Appeal to a Social Security Commissioner
on a question of law from a Tribunal's decision
dated 27 January 2011

DECISION OF THE SOCIAL SECURITY COMMISSIONER

1.	This is an appeal from two decisions made by the appeal tribunal sitting at Limavady on 27 January 2011 in respect of the same appellant.  The appeal tribunal in turn was considering appeals from two Departmental decisions arising from broadly the same sequence of events.

2.	I directed an oral hearing for each of the appeals and directed that the appeals should be heard together.

3.	For the reasons I set out below, I allow the appeal in respect of C3/11-12(IS) and I substitute a decision to the effect that the appellant was not entitled to income support (IS) for the period from 21 June 2004 to 18 August 2006.

4.	For the reasons I set out below, I allow the appeal in respect of C4/11-12(IS).

	REASONS

	Background

5.	The appellant had first been awarded IS support from 25 October 1990.  His award was later superseded so as to include housing costs from and including 12 December 1997.

6.	On 16 October 2008, a decision was made that the appellant no longer satisfied the conditions of entitlement to IS from 23 October 2003, on the basis that he had capital in excess of the prescribed amount.

7.	On 2 March 2010, a decision was made that the appellant was not entitled to IS from 17 November 2008 on the basis of being treated as having capital in excess of the prescribed amount.

8.	The appellant appealed each decision and the two appeals were listed to be determined by the same tribunal.

9.	The tribunal’s decision in relation to the first appeal was to the effect that the appellant no longer satisfied the conditions of entitlement to IS from 21 June 2004, on the basis that he “was treated as having” capital in excess of the prescribed amount of £8,000.

10.	The tribunal upheld the second decision that the appellant was not entitled to IS from 17 November 2008 as he “was treated as having” capital in excess of the prescribed amount of £16,000.  (The “prescribed amount” had increased from £8,000 to £16,000 on 10 April 2006).

11.	The appellant requested statements of reasons for the tribunal’s decisions and these were issued to him on 21 July 2011.  On 9 August 2011 he applied for leave to appeal from the decisions of the appeal tribunal.  On 22 August 2011 leave to appeal was granted by the legally qualified member who constituted the tribunal.  His appeal was subsequently received by the Office of the Social Security Commissioner on 20 September 2011.

	Facts as found by the tribunal

	(i)	First appeal

12.	The background facts were that the appellant had first been awarded IS from 25 October 1990, presumably on the basis of unemployment.  From 27 May 1997 the basis of his entitlement to IS became incapacity for work.  He had been residing as a tenant at a Northern Ireland Housing Executive (NIHE) property in Limavady.

13.	The tribunal accepted that in 1997, the appellant borrowed the sum of £16,000 from a friend, G McK, by way of a mortgage secured on the property, in order to purchase the house in Limavady from the NIHE and to carry out some essential repairs.  He was subsequently awarded housing costs as part of his IS entitlement.

14.	The tribunal accepted that in October 2003, the appellant obtained a further £28,000 mortgage loan from Abbey National plc on the security of the property in Limavady.  The tribunal accepted that this was initially for the purpose of carrying out essential repairs and improvements to the house in Limavady, based upon floor plan drawings dated January 2004.  The tribunal accepted that after the plans were drawn the appellant concluded that the proposed extension did not fit well with the property and that he should not proceed with the extension.

15.	The tribunal accepted that in June 2004 the appellant instead agreed to purchase a house in Maghera from Mr McK.  The tribunal found that the purchase of the house, which was yet to be built, involved the transfer of ownership of the appellant’s house in Limavady to Mr McK, plus the sum of £33,000.  The tribunal accepted that the arrangement dated 21 June 2004 showed that by that date the appellant had given up his plan to carry out the extension and renovations to the house in Limavady.

16.	It appears that the tribunal may have mistaken the exact details of the arrangement.  The written contract between the appellant and Mr McK was shown to me at the hearing of this appeal.  The representatives presently involved did not appear before the tribunal and cannot confirm that this is the document seen by the tribunal, dated 21 June 2004.  The contract which I have been shown in fact indicates that the consideration was the transfer of the property in Limavady plus the sum of £49,000.  The difference between the two amounts reflects the £16,000 loan to the appellant from Mr McK in 1997.

17.	The tribunal found that the sum of £33,000 was paid by the appellant to Mr McK by cheque on 18 August 2006.

18.	The tribunal noted that the parties were in agreement that the issue was whether the capital in excess of £8,000 held by the appellant from 23 October 2003 should be disregarded under Schedule 10 paragraph 8(b) of the Income Support (General) Regulations (NI) 1987.  The tribunal interpreted that provision as permitting a disregard of capital for the period of 26 weeks or such longer period as is reasonable in the circumstances where the capital is a sum acquired by the claimant on the express condition that it is to be used for effecting essential repairs or improvements to the home.

19.	The tribunal decided that when the loan was obtained from Abbey National plc it was on the express condition that it was to be used for effecting essential repairs or improvements to the house in Limavady.  On the basis that the signed agreement of 21 June 2004 indicated a clear intention not to proceed with the repairs or improvements, the tribunal accepted that the amount of the loan should be disregarded until that date.

20.	The tribunal decided that the appellant had capital in excess of the prescribed limit from 21 June 2004 and was not entitled to IS from 21 June 2004.  The tribunal found that £33,000 of the capital possessed by the appellant was transferred to Mr McK on 18 August 2006.  However, it considered, for reasons which I will explore below, that the appellant still possessed that capital in the form of a “chose in action”, leading it to conclude that he continued to have capital in excess of the prescribed limit even after the transfer to Mr McK.

	(ii)	Second appeal

21.	The appellant had made a further claim for IS from 17 November 2008.  On 2 March 2010 the Department had decided that the appellant should be treated as having capital in excess of the capital limit of £16,000 and that he was not entitled to IS.  This was the second decision appealed.

22.	In relation to this appeal, the tribunal further found that in pursuance of the agreement by the appellant to purchase a house in Maghera from Mr McK, the sum of £33,000 was paid by cheque to Mr McK on 18 August 2006.

23.	The tribunal noted a letter from WB Thompson & Co, solicitors, to the effect that there were difficulties with Mr McK’s title to the land in Maghera, which the applicant intended to purchase.  In the event that the original agreement between the appellant and Mr McK was not capable of fulfilment, Mr McK would return the £33,000 deposit.

24.	The tribunal concluded that the appellant had a “chose in action over the sum of £33,000” held by Mr McK and that, as the full amount was recoverable, he “was treated as having capital” of £33,000.  The tribunal reasoned that as this was in excess of the prescribed limit the appellant was not entitled to IS from 17 November 2008.

	Submissions

25.	The appellant submitted as his grounds of appeal that the tribunal erred in law in treating the amount of capital which he did not possess as a “chose in action” and that the tribunal had erred in law by failing to take into account his subjective intention when assessing that he could be treated as possessing capital which he did not possess.

26.	On 24 October 2011, the Department was invited to make observations on the appeal grounds. Mrs Rush responded for the Department.  She submitted that the tribunal had possibly erred in law by not specifying the amount of capital which was held by the appellant at material times.  However, it had not erred by failing to consider the appellant’s subjective intention and had not erred in finding that the £33,000 transferred to Mr McK was a “chose in action”.

27.	In response, Mr Breslin for the appellant sought to expand his grounds to include consideration of an additional disregard under paragraph 2 of Schedule 10 to the 1987 Regulations, and to submit that the tribunal had failed in its inquisitorial duty to investigate the applicability of other possible disregards.

28.	He maintained that the agreement of 21 June 2004 marked a new subjective intention to purchase a property suited to his “severe disabilities”.  He maintained his submission that until Mr McK might fail to fulfil his part of the bargain with the appellant, the appellant had no right to sue for the recovery of his money and therefore no “chose in action” existed.

29.	I directed an oral hearing of the appeal.  In advance of the hearing I further directed the parties to prepare written case summaries.

	Case summaries

30.	In addition to his earlier points, Mr Breslin submitted that the tribunal had erred in law by not following the guidance of the former Chief Commissioner in R2/09(IS) to ascertain if the sum of £33,000 transferred to Mr McK was actual or notional capital.

31.	Mr Breslin emphasised that when paying the deposit figure of £33,000 to Mr McK, the appellant had a significant operative purpose of buying a house more suited to his disabilities, rather than to secure entitlement to benefit.  The tribunal had not dealt with this issue in the second appeal and therefore erred in law.

32.	Mrs Rush in her submission responds by submitting that the tribunal correctly applied Schedule 10 paragraph 8, and that no other paragraphs in the Schedule have application to the appeal.

33.	She submits that the tribunal decided that a capital disregard applied for the period from 24 October 2003 to 20 June 2004 and that capital was possessed by the appellant from 21 June 2004 to 17 August 2006.  She submits that the tribunal further found that the appellant had further capital by virtue of a chose in action from 18 August 2006.

	Legislation

	The relevant law is contained in the Income Support (General) Regulations (NI) 1987 and is as follows:

	Capital limit

	45.	For the purposes of section 130(1) of the Contributions and Benefits Act as it applies to income support (no entitlement to benefit if capital exceeds prescribed amount), the prescribed amount is £16,000.

	Calculation of capital

	46.—(1) For the purposes of Part III of the Order as it applies to income support, the capital of a claimant to be taken into account shall, subject to paragraph (2), be the whole of his capital calculated in accordance with this Part and any income treated as capital under regulation 48 (income treated as capital).

		(2) There shall be disregarded from the calculation of a claimant’s capital under paragraph (1) any capital, where applicable, specified in Schedule 10 (capital to be disregarded).

	Notional capital

	51.—(1) A claimant shall be treated as possessing capital of which he has deprived himself for the purpose of securing entitlement to income support or increasing the amount of that benefit except—

		(a) where that capital is derived from a payment made in consequence of any personal injury and is placed on trust for the benefit of the claimant; or

		(b) to the extent that the capital which he is treated as possessing is reduced in accordance with regulation 51A (diminishing notional capital rule); or

		(c) any sum to which paragraph 43(2) (a) of Schedule 10 (capital to be disregarded) applies which is administered in a way referred to in paragraph 43(1)(a).

	SCHEDULE 10

	Capital to be Disregarded

	2.	Any premises or land acquired for occupation by the claimant as his home which he intends to occupy within 26 weeks of the date of acquisition or such longer period as is reasonable in the circumstances to enable the claimant to obtain possession and commence occupation of the premises or land.

	8.	Any sum—

(a) paid to the claimant in consequence of damage to, or loss of, the home or any personal possession and intended for its repair or replacement; or

	(b) acquired by the claimant (whether as a loan or otherwise) on the express condition that it is to be used for effecting essential repairs or improvements to the home, and which is to be used for the intended purpose, for a period of 26 weeks from the date on which it was so paid or acquired or such longer period as is reasonable in the circumstances to enable the claimant to effect the repairs, replacement or improvements.

	Observation

34.	An initial observation is that the appeal tribunal has used the expression “was treated as having capital” in each of the appealed decisions to refer to a situation where it found that the appellant had actual capital.  In the first decision this was actual capital in the form of money in a bank account and a “chose in action” arising from the value of a right to sue for recovery of the capital.  In the second decision it was again actual capital in the form of a “chose in action”.  In the context of the provisions in Chapter VI of the Income Support (General) Regulations (Northern Ireland) 1987 which deal with capital and notional capital, I consider that it is correct to refer to an appellant being “treated as having” capital only in the context of notional capital, where the capital asset is not in the appellant’s actual possession but the appellant is deemed to possess it as a matter of law.  Where this is not the case and the tribunal is referring to actual capital in the appellant’s possession or the value of a right to sue, the situation is not one of the appellant being “treated as having capital", but simply “having capital”.  However, nothing turns on this, and no error of law arises from the imprecise use of the relevant terminology, as it is nevertheless clear what the tribunal has decided in the present appeals.

	The first issue – capital disregards

35.	It was common case that the appellant acquired capital in excess of the prescribed limit on 23 October 2003.  This was in the form of an advance of £27,975 from Abbey National plc, secured by the appellant’s home in Limavady.  The receipt of the capital was not declared to the Department.  When the Department became aware of the amount of capital having been received by the appellant the initial decision was made that the appellant was not entitled to IS from 23 October 2003 as he had capital in excess of the prescribed limit.  The appellant continued to have capital in his account in excess of the prescribed limit until 18 August 2006.

36.	At the hearing before the tribunal, it was not disputed that the appellant possessed actual capital in excess of the prescribed limit.  However, it was contended on his behalf that the capital fell to be disregarded by virtue of Schedule 10 to the Income Support Regulations.

37.	The tribunal accepted the submission that paragraph 8 of Schedule 10 applied to the appellant’s circumstances.  It accepted that the advance from Abbey National plc to the appellant was a loan with the express condition that it was to be used for effecting essential repairs or improvements to the appellant’s home.  I have not been shown the evidence to this effect.  However, the Department now accepts that the loan was for this purpose and does not dispute the tribunal’s finding to this effect.  It is not argued by either party that the tribunal has erred in law in this part of its decision.

38.	The tribunal further found that on 21 June 2004, having decided that he would instead purchase a new property in Maghera, the appellant no longer intended to effect repairs or improvements to his home.  Therefore, the tribunal considered that the disregard which applied under paragraph 8 ceased from this point in time.

39.	On behalf of the appellant, Mr Breslin submitted that paragraph 2 of Schedule 10 to the Income Support Regulations applied from 21 June 2004.  This permits the disregard of:

“Any premises or land acquired for occupation by the claimant as his home which he intends to occupy within 26 weeks of the date of acquisition or such longer period as is reasonable in the circumstances to enable the claimant to obtain possession and commence occupation of the premises or land”.

40.	It is clear that the disregard applies to “premises or land”.  It might have applied had the appellant become the owner of the property in Maghera, but not been able to take possession of it.  However, I consider that it cannot be extended to cover sums of money in the appellant’s bank account, albeit that these were intended for use for the purchase of premises or land.

41.	Mr Breslin sought to rely on R(IS)11/94 in support of his argument.  That case concerned the calculation of housing costs under Schedule 3 to the Income Support Regulations in the context of determining whether a loan for the purchase of materials and paying for the labour to build a new house was an allowable expense.  I do not consider that that case assists the appellant on the facts in the present case.

42.	In his case summary, Mr Breslin had argued that the tribunal had an inquisitorial duty to identify any other paragraph of Schedule 10 which might assist the appellant.  When asked at hearing to identify any paragraph which had that effect, Mr Breslin accepted that he could not.

43.	I consider that the tribunal has not erred in law in the first appeal in relation to its application of the capital disregards.

44.	Mrs Rush submits that the tribunal may have erred in law to the extent that it has not actually quantified the amount of capital in the appellant’s bank accounts throughout the relevant period.  This amount fluctuated on a regular basis.  However, Mrs Rush is correct that relevant findings of fact need to be made.

45.	I find that, on the evidence contained in Tab 17 to the original Departmental submission to the tribunal, which consists of a bank statement for an Alliance and Leicester account in the appellant’s name with account number ending in 635, the appellant possessed capital £25,000 on 21 June 2004.  On the evidence contained at Tab 19 to the original Departmental submission, from 10 April 2005 the same sum of £25,000 was transferred to an Alliance and Leicester account in the appellant’s name with account number ending in 637.  On 14 August 2006, the sum of £25,000 was transferred to a further Alliance and Leicester account in the appellant’s name with account number ending in 687, bringing the balance in that account to £33,081.50.  Then on 18 August 2006, a cheque for the sum of £33,000 was drawn on that account leaving a balance of £80.10 overdrawn.  Therefore, on the evidence before me the appellant had capital below the prescribed limit from 18 August 2006.  However, from 21 June 2004 to 18 August 2006 the appellant had capital in excess of the prescribed limits applying during the relevant period.

	Supersession grounds

46.	The word “supersession” has not hitherto been used in these proceedings by the Department or the appeal tribunal.  However, as the first decision under appeal concerns the removal of the award of IS paid to the appellant for a past period, that is precisely the adjudication process which is engaged in the circumstances of the case.  This does not affect the outcome of the appeal, but for technical reasons I will correct the decision of the tribunal to reflect the omission of a reference to supersession.

47.	The last known decision on the appellant’s IS claim appears to be the decision to award an element of housing costs as part of the claim dated 12 December 1997.  My decision is that there are grounds to supersede the decision of 12 December 1997 awarding IS, in respect of the period from 21 June 2004 to 18 August 2006 inclusive, on the basis of ignorance of a material fact.  The material fact was that the appellant held capital amounting to at least £25,000 on 21 June 2004 rising to at least £33,000 on 18 August 2006 and that such amounts of capital were in excess of the prescribed limits of £8,000, and from 10 April 2006, £16,000.  Accordingly, the appellant was not entitled to IS throughout the period from 21 June 2004 to 18 August 2006 inclusive by virtue of section 130(1) of the Social Security Contributions and Benefits (Northern Ireland) Act 1992.

48.	I have found that there were grounds to supersede the award of IS for a particular period from 21 June 2004 to 18 August 2006.  The tribunal made a decision which related to a longer period than this, running beyond 18 August 2006, on grounds which relate to the treatment of the sum of £33,000 paid by the appellant to Mr McK.  Essentially the tribunal accepted the submissions of the Department that the appellant possessed a “chose in action”, namely the right to sue for recovery of the £33,000.  Therefore the tribunal considered that the appellant continued to have capital in excess of the prescribed limit beyond 18 August 2006, notwithstanding the fact that it was no longer in his possession.  The tribunal considered the same issue in the same way in relation to the second appeal.  For convenience, I propose to deal with this aspect of the first appeal and the second appeal together, calling it the second issue.

The second issue – chose in action as actual capital

49.	The second appeal arises both in relation to the period from 18 August 2006 in relation to the possible supersession of the appellant’s IS award, and in relation to the fresh claim for IS made by the appellant on 18 November 2008, the day after the Department’s first decision to disallow his IS.  Before considering the question of actual capital, I will comment on the applicability of notional capital to the appeals.

	Notional capital

50.	When by a decision of 2 March 2010 the Department disallowed the appellant’s fresh claim, it initially took the view that the appellant should be treated as having capital, based on the voluntary transfer of money to Mr McK.  It grounded its refusal of the claim on notional capital under regulation 51 of the Income Support Regulations, applying the diminishing notional capital rule.  However, it amended its submissions on this matter before the tribunal and this was not part of the Department’s case to me.

51.	I consider that it is correct for the Department not to seek to rely on the provisions relating to notional capital.  Under the notional capital rule, a claimant can be treated as continuing to possess capital he has deprived himself of for the purpose of securing entitlement to IS or increasing the amount of that benefit.

52.	There is, of course, an obligation on claimants to notify the Department of changes in their circumstances which might affect their entitlement to benefit.  Nevertheless, the appellant failed to disclose the change in his circumstances when he received almost £28,000 in October 2003.  Whether this was an innocent failure or otherwise, the undisputed evidence was that the Department did not know about the capital in the appellant’s possession during the period from October 2003 to August 2006 until late 2008.  As the Department was ignorant of the existence of the capital, there was no advantage in transferring it to someone else.  Furthermore, the appellant had transferred the money as part of a contractual agreement with Mr McK for the construction of a house.  Therefore a clear ulterior motive for the transfer existed.  I consider that there was nothing in these circumstances to suggest that transferring the capital to Mr McK was for the purpose of securing entitlement to IS or increasing the amount of that benefit.  The Department is correct not to continue to rely on the application of the notional capital provisions to the case.

	Chose in action

53.	Instead, the case made by the Department and accepted by the tribunal arises from the concept of a “chose in action”.  This expression refers to a thing which is not in a person’s possession but is recoverable by legal action.  Halsbury’s Laws of England (Volume 13 (2009) 5th edition) describe it as a term “employed to denote so many and such various classes of things, that it is impossible to give an accurate and complete definition of what it means and may include at this present day”.  It is perhaps better to look at examples of choses in action.

54.	Debts which have been held to be choses in action include mortgage debts; contractual rights to present or future payments; money in building society or savings bank accounts; debentures of various kinds; dividends on a share in a company; a right to rent; negotiable instruments including bills of exchange, promissory notes and cheques.

55.	Equally, however, a right to sue has been held to be a chose in action, for example a right of action arising under contract, including a claim for unliquidated damages for breach of contract, or a right of action arising out of tort.

56.	The Commissioners have considered the relevance of a chose in action to the assessment of capital in a small number of cases.  The former Chief Commissioner in R2/09(IS) described a chose in action as a property right in something intangible or which is not in one’s possession, but enforceable through legal or court action.  In that case he accepted that where a claimant had initiated High Court proceedings for recovery of money lent to her daughter, the case was not one of notional capital but rather actual capital in the form of the chose in action.

57.	The former Chief Commissioner makes clear in R2/09(IS), however, that it is not the actual amount of the sum owed which is the value of the chose in action, but rather the value of what a third party would pay for the claimant’s rights of action, bearing in mind any security offered or the lack of it, the rate of interest and the repayment terms.

58.	The tribunal in the present case placed weight on a letter from Mr McK’s solicitor to the appellant’s solicitor in which he outlined problems which had delayed the completion date for the purchase of the house in Maghera.  He indicated in that letter that Mr McK, if he could not resolve the title issues reasonably soon, would have no option but to repay the deposit to the appellant.  On this basis, the tribunal held that the appellant had a chose in action over the £33,000, and reasoned that the full amount was recoverable.  On this basis the appellant was treated as having this capital of £33,000 from 18 August 2006.

59.	The first argument submitted by the appellant was that the tribunal had erred on law based on its approach to the valuation of a chose in action.  It was argued that the tribunal had erred because it assessed the whole of the amount of £33,000 to be the value of the chose in action.  The second argument was that there was no chose of action in the circumstances of the case.

60.	It is clear from all the authorities that the value of a chose in action is not the amount of the actual sum due to the party who possesses the right to it.  Rather the value is to be calculated in terms of what a third party would pay for it.  Thus, for example, if party A has a mortgage with bank B, the mortgage is a chose in action which bank B could sell for value to bank C.  If a party A has a credit agreement with party B, B could transfer the right to receive repayment from A to a third party C.  In each case, B could consign the right to recover the amount advanced, but the value of the chose in action is the price which party C is willing to pay for it, not its face value.  Thus, in the case of a mortgage, where the property market has taken a downward turn, the current value of the property which constitutes the security for the mortgage might be a factor affecting its value.  In the case of a right to recover under a credit agreement, the likely solvency of party A could be a factor affecting its value.

61.	In CJSA/204/2002 the mother had given a loan and had a right to be repaid by her son.  Commissioner Jacobs held that this was a chose in action, which had a potential market value to a third party.  The value was the amount she could have obtained had she sought to assign it to a third party (see paragraph 12).

62.	In R2/09(IS), another case involving an inter-familial loan, the mother was intending to bring High Court proceedings against her daughter and son-in-law.  Chief Commissioner Martin alluded to the difficulties in calculating the value of a chose in action in R2/09(IS), and emphasised that this needs to be valued on the basis of the circumstances down to the date of decision.  The prospect of success in the proceedings would affect the value of the right to sue in such cases.

63.	The inherent difficulty in achieving a valuation cannot justify the tribunal in valuing the chose in action as the full value of the debt.  In the light of the relevant authorities, I accept that the tribunal has erred in law in its approach to valuation.  More fundamentally, however, the appellant challenges the correctness of the tribunal’s finding that the right to sue for the £33,000 deposit is a “chose in action” at all.

64.	The payment of £33,000 by the appellant to Mr McK is not a loan with particular terms governing repayment and is not secured in any way.  It represents a deposit payment in part consideration of a contractual arrangement to purchase land with a new house built on it.  I do not propose to examine the effectiveness of the written agreement between the appellant and Mr McK in terms of the legal formalities pertaining to the sale of land.  I assume that it is a valid contract and it has not been suggested otherwise.

65.	I have considered relevant authorities such as Re Collbran [1956] Ch 250 and Société United Docks v Government of Mauritius [1985] AC 585.  Arising from these, I consider that the right to sue for breach of contract related to the failure to perform a contractual obligation is a chose in action as a matter of law.  In each of these cases a clear breach had occurred – a tenant had left a property without carrying out an agreed covenant to carry out works of repair to the property, and an employer had failed to make payments due under a contract of employment.  Therefore, I consider that the appeal tribunal did not err in law by finding that the possible right to sue for breach of contract amounted to a chose in action.

66.	However, it is not the case that the mere existence of a contract gives rise to the right to sue.  It is breach of contract or possibly frustration of contract which gives rise to that right.  An inherent difficulty therefore lies in determining whether there has been a breach of contract and in identifying the point in time at which breach of contract arises.  The tribunal in the present case held that a chose in action arose as from the payment of the deposit of £33,000 to Mr McK on 18 August 2006.

67.	In the particular case, there was no term of contract specifying a date for the completion of the contract.  It was to be completed upon the construction of the house at Maghera.  Time was not of the essence.  In the absence of a specific term governing the date of completion, the law will imply a term of reasonableness relating to the period for completion.

68.	The tribunal heard evidence that the building of the house at Maghera had been delayed because of the illness of Mr McK’s brother, who subsequently died.  The tribunal was aware that the house had been built during 2009.  The tribunal was also aware from evidence in the form of letters from the appellant’s and Mr McK’s solicitors, that there was a continuing problem relating to the title of the land on which the house was built.

69.	In finding that the appellant had a chose in action right from the payment of the deposit on 18 August 2006, I consider that the tribunal erred in law.  A chose in action could only arise upon breach of contract.

70.	At 16 October 2008, being the date of the first appealed decision, there had been considerable delay by Mr McK in completing the house in Maghera.  However, there were personal circumstances affecting Mr McK’s ability to progress the work.  In the context of the personal friendship of the parties to the contract, these were accepted and waived by the appellant.  It is not my role to decide actions in breach of contract.  However, in all the circumstances, I would not consider that the appellant had a strong case to sue for breach of contract arising from delay.  Further, to the extent that there had been an unreasonable delay leading to a possible breach of contract, the resulting chose in action could not reasonably have been valued at £33,000.

71.	At 2 March 2010, being the date of the second appealed decision, the building work on the property was complete.  However, an issue of title which was outside the control of Mr McK had arisen and, through his solicitors, he was seeking to resolve it.  He did not seek to repudiate the contract in any way.  While the matter had not resolved at the date on which the tribunal was considering it, it is questionable whether unreasonable delay could be ascribed to Mr McK in the circumstances.  There might have been a prospect of frustration of contract if the terms could not be fulfilled.  Again, however, the appellant would not have had a strong case for breach of contract, with the resultant effect on the value of the chose in action.  Again, I consider that the resulting chose in action could not reasonably have been valued at £33,000.  The tribunal has erred in law in ascribing this value to the chose in action.

72.	Valuation of the right to sue in such cases would depend on expert advice, such as counsel’s opinion on the merits of legal proceedings.  It would also suppose the existence of a third party willing to advance a sum of money to the claimant in exchange for his right to sue.  I am not aware of a ready market in Northern Ireland for such choses in action, and I consider that this is a highly relevant factor in valuation.

73.	The Department should be aware that, if seeking to rely on the capital value of a chose in action arising from the right to sue in breach of contract, the nature of the evidence required may be quite onerous.  If, as here in the case of the first appeal, it is seeking to supersede an existing award on the basis of the possession of actual capital in the form of the value of a chose in action, the Department will carry the burden of proof.

	Conclusions

74.	Having found that the tribunal has erred in law, I have given thought to whether I should remit the appeals to a new tribunal with directions, or whether I should seek to determine the appeals myself and give the decisions which the tribunal should have given.  The present case involves an inherently difficult exercise in valuation and neither representative could suggest an easy process to resolve it.  If remitting the case, I would be placing that burden on a new tribunal.  In such circumstances, the tribunal might be faced with conflicting evidence of valuation from the parties and be placed in a situation of having to choose between valuations, or in determining a valuation which was its own, but based on the conflicting evidence.

75.	I have decided that it is expedient that I give the decisions which the tribunal should have given.

76.	The tribunal when hearing the appeals was required by Article 13(8)(b) of the Social Security Order (NI) 1998 not to have regard to circumstances not obtaining at the date the decision appealed against was made.  In relation to the first appeal that was 16 October 2008.  In relation to the second appeal it was 2 March 2010.  The same constraint applies to me.

77.	Having given consideration to my own evaluation of the merits of the appellant’s right to sue for return of the £33,000 deposit due to breach of contract arising from unreasonable delay, in all the circumstances of the case, between 16 August 2006 and 16 October 2008, as of 16 October 2008, I hold that the value of such a right would be nil.

78.	Having given consideration to my own evaluation of the appellant’s right to sue for the return of the £33,000 deposit due to breach of contract arising from unreasonable delay, in all the circumstances of the case, from and including 17 November 2008, as of 2 March 2010, I hold that the value of such a right would be £3,000.

79.	On the basis of these findings, I hold that the appellant did not have capital in excess of the prescribed limit from 18 August 2006 to 17 November 2008.  I further hold that the appellant did not have capital in excess of the prescribed limit from and including 18 November 2008.

80.	If the appellant meets all the other conditions of entitlement, the consequence for the appellant is that he is entitled to IS from and including 18 August 2006.

(signed):  O Stockman

Commissioner

27 April 2012