IN THE UPPER TRIBUNAL	Case No.  CPC/561/2010
ADMINISTRATIVE APPEALS CHAMBER

Before Judge of the Upper Tribunal Miss E. Ovey

Decision:   The decision of the tribunal contained an error of law.  For the reasons given below, in exercise of my power under s.12(2) of the Tribunals, Courts and Enforcement Act 2007 I set the decision aside and remit the case to the First-tier Tribunal for reconsideration by a tribunal constituted differently from the previous tribunal.

REASONS FOR DECISION

1.	This is an appeal by the claimant against the decision of the First-tier Tribunal given on 23rd November 2009.  By its decision, the tribunal dismissed the claimant’s appeal against the decision of the decision maker given on 13th March 2009.  In front of the tribunal, the issue was whether or not the decision maker had been correct in deciding that an increase in the amount of the claimant’s pension credit from £16.35 a week to £73.22 a week should take effect only from 17th November 2008 and not from the start of the claim.  Since the claim itself had effect from 14th April 2005 this is obviously a very significant matter for the claimant.

2.	The claimant was unrepresented before the tribunal but has had the assistance of solicitors on the appeal.  As a result, the issues before me are substantially wider.  The claimant contends not only that the increase in his amount of pension credit should be backdated to the start of the claim, but also that in any event the amount of £16.35 was wrongly calculated.  The Secretary of State does not accept the argument for backdating put forward by the claimant, but does agree that the original calculation was mistaken and invites me to set aside the tribunal’s decision and to determine that the claimant’s original pension credit should have been in the sum of £31.35 a week.

3.	For the reasons set out below, I conclude that:

(1)	the tribunal’s decision contained an error of law and should be set aside;

(2)	the calculation of the claimant’s original pension credit was wrong;

(3)	further evidence is necessary to determine whether the mistake was caused by an official error, so that the correct figure should be substituted from the start of the claim;

(4)	in any event, on the material before me, it is not possible to decide what the correct figure is.

The matter must therefore be remitted to a new tribunal to determine the points arising under (3) and (4) above.

4.	The relevant facts are as follows.

5.	The claimant claimed state pension credit by a form dated 27th July 2005, asking to have it paid from 20th July 2004.  As I have said, in fact benefit was awarded with effect from 14th April 2005.  There is no copy of the decision in the papers (the computer printouts at pp. 23 and 24 do not constitute a copy of the decision), but it may be that the start date was determined by the fact that it was on that date that the claimant’s wife attained the age of 60.  I return to this point in paragraph 39 below.
6.	The claim form states, inter alia, that the claimant and his wife had savings or investments of £50,000, consisting solely of income bonds or capital bonds (pp. 12 and 13).  The claimant supplied with the claim form a copy of a single page document showing that “the above bond” was an investment in the STG Offshore With Profits Fund with a value of £46,416.37 and a surrender value after a market value adjustment of £38,989.75 (p.23A).  There is no description of the bond which appears to satisfy the words “the above bond” and that fact, coupled with the appearance of page 23A as a whole, suggests that the document may have been incomplete.  The claimant may have supplied only that part of a letter or other document which he believed was material to his claim.
7.	Even in the absence of the decision awarding pension credit, it is clear from p.24 that in determining the amount of his benefit the decision maker treated the claimant as having a tariff income of £81 a week derived from capital of £46,416.37, in accordance with the provisions of s.15(2) of the State Pension Credits Act 2002 and reg. 15(6) of the State Pension Credit Regulations 2002, S.I. 2002 No. 1792.  Thus it is clear that the capital in the bond was taken into account, and was taken into account at its value prior to the market value adjustment rather than at the surrender value.
8.	On 20th November 2008 the claimant wrote to the Department of Work and Pensions in the following terms:
“Change of Circumstances …
I have previously declared under other income, savings & investments a figure which I understand now was not applicable.
This came to my attention after September 2008 having received your letter regarding my pension credit.
I would appreciate it if my credit could now be re-calculated & if increased made retrospective.”
9.	The papers do not include a copy of the letter referred to by the claimant, so it is not possible to know what alerted him to the point taken in his letter.
10.	The claimant included with his letter a copy of a policy certificate relating to a Clerical Medical policy number 25100630/01, stated to relate to a single premium policy of £2,0000 paid by the claimant’s wife under which both the claimant and his wife were lives assured (p.26) .  The certificate contains the following:
“This certificate comprises two pages which should be read in conjunction with the CMI Premier Bond Provisions reference X873.  The Initial Allocation details shown reflect only the position at the commencement of the Account and alterations arising from the exercise of options will be evidenced by separate documentation.”
There is only one page of the certificate in the papers before me.
11.	The claimant also included with his letter a copy of a letter dated 17th November 2008 from a financial adviser enclosing an extract from an Age Concern leaflet about pension credits, which stated that the surrender value of a life insurance policy is not counted as part of a claimant’s capital resources.  The letter confirmed that the Clerical Medical policy is a life insurance policy and stated that at 14th November 2008 the death benefit under the policy was £3,257.03 and the surrender value was £2,612.08.  I may say that there is virtually nothing to show that the policy referred to at p.23A and the policy the subject of the letter are one and the same, other than the fact that the name CMI Insurance Company Limited appears in minute print at the end of p.23A, but plainly all concerned have proceeded on the basis that that is the case, and I am content to do so also.
12.	Further computer printouts at pp.30 to 32 show that after some delay and apparently after the production of some bank statements the claimant’s pension credit was recalculated as amounting to £73.22 a week with effect from the benefit week in which he contacted the Department (i.e., with effect from 17th November 2008) and arrears were paid to him.  That decision was apparently made on 13th March 2009.  Again there is no copy of the decision in the papers and it is not possible to tell on what legal basis the decision maker changed the original decision.  It seems clear, however, that the intention was to apply para. 10 of Sch. V to the 2002 Regulations, which requires the surrender value of any policy of life insurance to be disregarded for the purpose of calculating income.
13.	The claimant appealed against that decision not with respect to the amount of pension credit now awarded, but in relation to the date from which the new decision became operative (p.35).
14.	The decision was reconsidered on 5th May 2009 and a copy of the decision on reconsideration is with the papers at p.36.  The original decision was not revised, on the ground that “there has been no mistake or error made on the decision for a revision to apply”.  The decision maker referred to p.23A and stated that the claimant had provided “a current valuation showing a history of withdrawals from the bond”.  She accepted that the value of the policy should be ignored because an element of life insurance was attached to the policy and referred to R(IS) 7/98, but pointed out that the claimant had not included anything on the original claim to show that the policy included an element of life cover.
15.	I pause there to comment that it seems to me clear that the decision maker on 5th May 2009 was considering whether there had been an initial mistake or error and not whether there had been a relevant change of circumstances.  Under reg. 3(5)(a) of the Social Security and Child Support (Decisions and Appeals) Regulations 1999, S.I. 1999 No. 991, a decision of the Secretary of State may be revised if it arose from official error and by virtue of s.9(3) of the Social Security Act 1998 such a revision takes effect from the date of the original decision.  Thus the retrospective effect which the claimant wants would be achieved.
16.	In my view, that approach by the decision maker was correct.  It seems to me plain that the claimant’s argument was that the value of the bond should never have been included as part of the capital held by him and his wife:  i.e., there had been a mistake.  Although his letter referred to a change of circumstances, there is nothing to suggest any change in the circumstances relating to the bond or in anything else other than his understanding of what capital falls to be disregarded.  The discovery of a mistake does not constitute a relevant change of circumstances, because the change (such as it is) does not itself affect the entitlement to benefit.  Consistently with that proposition, although a decision may be superseded under reg. 6(2)(a) of the Decisions and Appeals Regulations on the ground of a relevant change of circumstances, the superseding decision will generally take effect from the date of the change rather than from the date of the original decision, subject to notification requirements:  see reg. 7.
17.	Unfortunately, the Secretary of State, in his submission to the tribunal, proceeded on the footing that there had been a relevant change of circumstances when the claimant informed the Department that the bond was in fact a life policy and addressed the issue whether there is any statutory provision under which the new decision could have retrospective effect.  As explained in paragraph 16 above, in my view that was a mistaken approach.
18.	Also unfortunately, this point was not picked up by the tribunal, although it is clear from the record of proceedings at pp.37-39 that at the hearing the claimant was not contending that there had been a relevant change of circumstances but that there had been a mistake as to a material fact caused by (a) the failure of the claim form to make clear that insurance policies did not have to be declared and (b) the failure of the original decision maker to read the document correctly and observe that the policy was a life policy.  Not surprisingly the claimant made this point by reference to the Secretary of State’s power of supersession, as summarised in section 6(a) of the Secretary of State’s submission to the tribunal (p.6), given that the submission itself did not deal with the reg. 3 power of revision although it clearly underlay the decision given on reconsideration.
19.	The tribunal’s reasons for dismissing the appeal, set out in careful detail at pp.42-44, were in summary as follows:
(1)	the decision maker could not have been expected to draw the conclusion from the available material that the bond included an element of life cover (on which point the tribunal made a finding of fact);
(2)	therefore there was a change of circumstances when the Department became aware in November 2008 that the bond did include such an element;
(3)	the change was not reported “within the 13 month period prescribed to accept Special Reasons for backdating”.  

20.	It will be clear from what I have already said that in my view paragraph 19(2) shows an error of law, in that it shows a misunderstanding as to what is capable of constituting a relevant change of circumstances constituting a ground for supersession.  Paragraph 19(3) also shows an error of law, since no such 13 month period is prescribed for backdating an application for supersession.  The tribunal appears to have had in mind reg. 4 of the Decisions and Appeals Regulations, which allows the Secretary of State to extend the normal one month time limit for applying for a revision under reg. 3(1) to a period of up to 13 months.  Despite the claimant’s submissions, the tribunal did not in terms address the question whether there had been a mistake of fact and necessarily therefore did not consider whether there had been a mistake resulting from official error for the purposes of reg. 3(5)(a).

21.	It follows that the reasoning of the tribunal was flawed and I have power to set its decision aside under s.12(2) of the Tribunals, Courts and Enforcement Act 2007.  In considering whether to exercise that power, however, I bear in mind that:

(1)	as set out in paragraph 19(1), the tribunal concluded that the decision maker could not have been expected to appreciate that the bond included an element of life cover;

(2)	the result in fact achieved by the tribunal’s decision would equally be achieved by a decision superseding the original decision under reg. 6(b) of the Decisions and Appeals Regulations on the ground that the decision was made in ignorance of, or was based upon a mistake as to, some material fact.

The retrospective effect which the claimant seeks can be achieved only if the ignorance or mistake arose as a result of an official error within the meaning of reg. 3(5)(a).

22.	In saying what I have said in paragraphs 20 and 21 above, I have accepted a principal submission of the claimant’s grounds of appeal accompanying his application for leave dated 18th February 2010, namely, that there was no relevant change of circumstances.  Although the Secretary of State’s submission to the Upper Tribunal is not entirely clear on the point, as I read it, the Secretary of State does not dissent from that proposition or its corollary that any supersession would be on the ground of ignorance of, or a mistake as to, a material fact.  The crucial point for the claimant’s purposes, and the point at which the claimant and the Secretary of State clearly do part company, is the issue of whether the original decision was caused by official error.

23.	The claimant’s case that there was an official error in taking into account the value of the policy at all is based on the fact that the claim form requires disclosure of savings and investments and at no point indicates either that life policies should not be disclosed or that life policies should be identified as such so that they can be disregarded.  In effect, the claimant says that in those circumstances, where disclosure has been made, it is for the Department to consider whether what has been disclosed is a life policy and to seek further information for that purpose if necessary.  He points out that p.23A refers to CMI Insurance Company Limited and asks what other kind of policy that company might be supposed to issue.  Judge Wikeley, in giving permission to appeal, also drew attention to the reference to “surrender value”, a term typically associated with life insurance products.

24.	The Secretary of State in response says that it is for the claimant to provide evidence to establish his entitlement, in accordance with R(SB) 2/83, and that the material produced by the claimant when he made his claim was not sufficient to show that the bond should be disregarded.  The Secretary of State refers to the tribunal’s finding in that respect and the reasons given and submits that that part of the decision was not erroneous in law.

25.	The term “official error” is defined in reg. 1 of the Decisions and Appeals Regulations as:

“an error made by –

(a)	an officer of the Department for Work and Pensions …which no person outside the Department … caused or to which no person outside the Department … materially contributed; …”

It appears to me that the Secretary of State’s submission is in effect a submission that there was an error in determining the claimant’s capital for the purposes of state pension credit, but the error was either caused or materially contributed to by the claimant.

26.	I accept, of course, the general proposition stated in paragraph 11 of R(SB) 2/83 that the primary duty for making out his case rests on the claimant.  It is to be noted, however, that that statement was made in relation to a submission that the tribunal should have investigated the nature of a sum in a building society account by making inquiries as to what had happened to the claimant’s business assets when the business was closed down.  In that event, the tribunal would or at least might have discovered that the money was a business asset which ought to be disregarded in determining the claimant’s capital resources.  The account was on its face a personal account on which the claimant could draw freely and at the same time he held a separate business account.  The Tribunal of Commissioners determining the appeal held that there had been no failure by the tribunal to discharge its inquisitorial function in its not having made the suggested inquiries and that there was thus no error of law.  It was not a case in which there was an established error by the Department and the question was what responsibility, if any, the claimant bore for that error.  The claimant’s solicitors rightly draw attention to the nature of the decision in the case in their observations on the Secretary of State’s submission.

27.	In my view, R(SB) 2/83 cannot be pressed too far in the present context.  On the footing that the Department produces a claim form which (a) requires claimants to identify all their savings and investments and asks for proof of them (expressly on the footing that the Department may be able to reward them for any savings and investments:  see p.13) and (b) makes no reference to the possibility of disregarding life policies, while identifying some types of investment which can be disregarded (p.15), it seems to me a reasonable starting point that a claimant has taken sufficient initial steps to establish his claim if he completes the form accurately according to its terms and provides the documents requested.  That is what the claimant did in this case.  I do not accept that the claimant must familiarise himself with the State Pension Credit Regulations so that he can identify, presumably outside the claim form, capital which he contends should be disregarded, as appears to be the implication of the Secretary of State’s submission.

28.	I recognise that this approach potentially puts the Department in a difficult position, since a decision maker may, and on the tribunal’s finding of fact in this case did, reach a decision about a claimant’s capital without having in his or her possession the information necessary to make a correct decision.  On the analysis set out above, the incorrect decision would nevertheless be the result of official error, since it was not caused or materially contributed to by the claimant but rather by the inadequacy of the claim form.

29.	In practice, however, it is by no means clear that that is the case.  In paragraph 27 I referred to “a reasonable starting point”.  I note that the claim form bears prominently on its first page a picture of a booklet relating to pension credit and entitled “Notes to help you fill in the form” and that the first page also gives the number of a free telephone line for assistance and asks claimants to read the booklet containing the notes before filling in the form.  Other references to the booklet appear elsewhere in the form.  It is obviously possible that the notes deal with life policies and explain how the form should be completed if the claimant has such a policy.  If that is the case, and the claimant did not follow the notes, the argument that he caused or materially contributed to the error will be much stronger.  Unfortunately, the notes do not appear in the material before me. 

30.	In those circumstances, it is clearly appropriate to set aside the tribunal’s decision so that the question whether there was an official error can be considered further in the light of the explanatory notes.

31.	This conclusion does not involve a determination that there was an error of law in the tribunal’s finding that the Department had acted reasonably upon the information contained in the claim pack and could not have been expected to draw the conclusion that the bond included an element of life cover.  I do, however, comment that in my view, given that it was acknowledged on all sides that a mistake had been made (whether or not the discovery of the mistake was classified as a relevant change of circumstances), the question the tribunal should have asked itself was whether or not there had been an official error within the meaning of reg. 1.  That in turn required a consideration not of whether the Department had acted reasonably albeit mistakenly, but whether anyone outside the Department had caused or materially contributed to the mistake.  The tribunal does not appear to have asked itself that question.

32.	As I said in paragraph 2 above, the Secretary of State accepts that there was an official error in the calculation of the claimant’s tariff income.  That error consisted of making the calculation on the footing that the value of the bond was £46,416.37 rather than the surrender value of £38,989.75.  Reg. 19 of the State Pension Credit Regulations provides that capital is to be calculated at its current market or surrender value less an allowance of 10 per cent if there would be expenses attributable to sale.  P.23A shows that the bond has a surrender value but there is no surrender charge.  It seems clear that the surrender value is therefore the appropriate basis for calculating the amount of capital.

33.	That, however, is not the end of the matter.  It is agreed on all sides that the bond is a life policy, having regard to the decision of Mr. Commissioner Howell (as he then was) in R(IS) 7/98.  The definition of “policy of life insurance” in reg. 1 requires only that the payment of money is assured on death or the happening of any contingency dependent on human life.  There is no requirement that the death benefit should be a substantial element of the benefits secured by the policy.  As R(IS) 7/98 shows, the fact that economically a policy functions primarily as a form of unit trust investment does not exclude it from the definition of policy of life assurance.

34.	R(IS) 7/98 also shows, however, that such policies may contain options for monthly or other periodic withdrawal of capital and raises the possibility that in appropriate circumstances a substantial investment in such a policy may fall to be treated as notional capital of the claimant on the ground that the claimant has deprived himself of that capital for the purpose of securing entitlement to benefit.  Although that case was concerned with the question what constitutes capital for the purposes of income support, similar issues may arise in relation to state pension credit.  As is pointed out in the Age Concern leaflet (p.29), when a policy is cashed in, the sums received will normally become part of the policyholder’s savings, and reg. 21 contains provisions as to notional capital.

35.	As noted above, the information relating to the claimant’s bond is not complete, but the exercise of options is clearly contemplated at p.26 and the reconsideration decision at p.36 refers to a history of withdrawals from the bond (although I have not seen such a document and it is not clear to me to what the decision maker was referring).  I point out also that the value of the death benefit is very small compared to the total value of the bond, suggesting that its value may be realised in another way.  The possibility that the claimant derives some benefit from the bond which ought to be taken into account in determining his claim therefore emerges from the material before me.

36.	In theory, there might also be an issue under reg. 21 to be considered, although if the total investment in the bond was made in 2000, when the claimant’s wife made her investment of £2,000, it is difficult to see how the claimant could have had the intention of depriving himself of capital in order to secure entitlement to state pension credit, a benefit which did not exist at that date.

37.	In those circumstances, I take the view that the facts are not sufficiently clear for me to express a view on the amount of pension credit to which the claimant was entitled whether or not he was entitled to have his capital calculated on the footing that the bond was to be disregarded from the outset of the claim or only from 17th November 2008.  The way forward is for the relevant documentation to be produced, for the Department to consider its position and for the new tribunal to decide the issues before it at the hearing in the light of the submissions then made to it.  I should, however, make clear that I am not implying that I should expect the Department to contend otherwise than for the figure of £31.35 a week up to 17th November 2008, unless, of course, it concedes the claimant’s primary official error point. 

38.	Finally, I come back to the question of the date from which the claimant was awarded pension credit.  This point was raised by the claimant in his grounds of appeal in support of a contention that the tribunal erred in law in giving a decision which confirmed the decision of the Secretary of State dated 13th March 2009, of which there was no copy in the papers.  As part of that contention, the claimant points out that there is no copy of the original decision either and accordingly no explanation of the reasons why the claim was not backdated to 27th July 2004 as he requested or of why it was in fact apparently backdated to 14th April 2005.  The tribunal itself appears to have proceeded on the misapprehension that the claim started when the claimant submitted his claim form.

39.	Given the conclusions I have already reached, I do not need to deal with the question whether the tribunal made a further error of law as suggested.  It is the case, however, that when the claimant completed his claim form on 27th July 2005 a claim to state pension credit could be backdated for 12 months from the date of the claim if at the earlier date the claimant already satisfied the conditions for pension credit:  see reg. 19 of the Social Security (Claims and Payments) Regulations 1987, S.I. 1968 and para. 12 of Sch. 4 to those Regulations as they then stood.  The claimant stated on p.19 his belief that he was entitled to pension credit from 20th July 2004.  At first sight, that exceeds the 12 month time limit, but it remains unclear from the material in the claim form why he was entitled to pension credit from 14th April 2005 but from no earlier date.  This is another point with which the new tribunal should deal if it cannot be resolved prior to the hearing.

40.	I therefore give the following procedural directions to the parties in connection with the reconsideration of the case, pursuant to s.12(3)(b) of the Tribunals, Courts and Enforcement Act:

(1)	the Department is to produce copies of the original decision on the claim (the date of which is unknown), the decision of 13th March 2009 which the claimant has appealed against and the booklet of explanatory notes;

(2)	the claimant is to produce copies of any additional pages of the document appearing at p.23A, the second page of the document at p.26 and, if possible, the CMI Premier Bond Provisions reference X873 there referred to;

(3)	the Department is to notify the tribunal and the claimant whether it still contends that there was no official error and whether, if that contention is established, it still accepts that the correct amount of pension credit from the start of the claim to 17th November 2008 was £31.35 a week.  If it does not accept that that is the correct amount, or if it seeks to contend that £73.22 is not the correct amount if there was an official error, it should state its contention as to the correct amount;

(4)	the claimant is to notify the tribunal and the claimant whether he accepts that 14th April 2005 was the correct start date of the claim and if he does not, he should state what he contends the correct start date was.

41.	The direction in paragraph 40(2) above does not preclude the Department from requesting from the claimant any further information which it may require in order to deal properly with the issues raised by the claim.

42.	I further direct the tribunal to consider the issues identified in this decision, in so far as those issues remain live in the light of the notifications given to the tribunal pursuant to paragraph 40 above, together with any further issues which it may appear to the tribunal require to be determined.

(Signed on the original)	
	Judge of the Upper Tribunal
	22nd September 2010