IN THE UPPER TRIBUNAL	Case No.  CH/2120/2012
ADMINISTRATIVE APPEALS CHAMBER

Before Judge Mark

Decision:  
1.	The identity of the Respondent is corrected to Wychavon District Council.
2.	The appeal is allowed.  I set aside the decision of the tribunal and substitute my own decision setting aside the decisions of the council and determining that the value of the claimant’s beneficial interest under a declaration of trust made by his mother and dated 31 August 2010 was £7,200 in November and December 2010.
2.	I direct that the council is to assess the claimant’s entitlement to housing and council tax benefit from 9 November 2010 on that basis.

REASONS FOR DECISION

1.	This is an appeal with the permission of an Upper Tribunal Judge from a decision of the First-tier Tribunal dated 2 February 2012.  The decision was given on the appeal of the claimant from two decisions of the Wychavon District Council dated 2 and 3 December 2010 determining that the claimant was not entitled to council tax benefit or housing benefit from 24 May 2010 and that there had been overpayments of the two benefits amounting to £438.14 and £2907.60 respectively which were recoverable from the claimant.

2.	In fact, somewhat curiously, the appeal letter refers to an appeal from a decision contained in a letter of 30 November 2010 (file, p.68) giving notice of a revised decision not to pay benefit after 8 November 2010.   

3.	Unfortunately, the respondent was identified as Worcester City Council in the decision notice, and although it was correctly identified as Wychavon District Council in the Statement of Reasons, the case has proceeded in the Upper Tribunal with Worcester City Council as the respondent.  This has not made any practical difference because the matter has been dealt with throughout by the South Worcestershire Revenues and Benefits Shared Services unit, and the same person who represented Wychavon District Council before the tribunal also acted on this appeal.  I see no reason therefore to invite any further submissions from Wychavon before giving this decision, but it is necessary that that council is substituted for Worcester City Council as respondent.

4.	The claimant had been in receipt of housing and council tax benefit.  In May 2010 he received a lump sum of £25,000 from a divorce settlement.  He promptly informed the council, which then informed him, wrongly, that the money he had received would be disregarded provided he used it to buy a property within 26 weeks.  The claimant then used £20,000 to purchase an interest in a property in circumstances to which I shall return, but this was not a property which he intended, or was able, to occupy as his home.  An additional £2000 was spent to assist in the renovation of the property, £2000 was spent on day to day living (his income was very small or non-existent) and £1000 was given to his two daughters.  

5.	When the council was told what he had done, it decided that the £25,000 could not be disregarded from the start and that the claimant had not been entitled to either benefit from 24 May 2010 because his capital exceeded £16,000.  It also decided that there had been an overpayment of both benefits from that date and that the claimant should repay those sums.  When it was pointed out that the claimant had acted as he had because of the misleading advice given by the council, the matter was reconsidered to the extent that the council was prepared to pay benefit for the period of the 26 weeks disregard only.  It was not willing to disregard the capital beyond that period.  It accepted that the claimant had properly spent the £5000, but it valued his interest in the property at £20,000 less 10 per cent for expenses, resulting in capital of £18,000.

6.	By letter of 30 November 2010, the local citizens advice bureau, acting on behalf of the claimant, wrote asking that the capital be recalculated on the diminishing capital rule so as to bring it under £16,000.  At the same time it pointed out that the claimant had no income whatsoever and no capital.  He was having to give up his tenancy and move in with his parents.  Had he been properly advised he would not, the letter concluded, be in this mess.

7.	By letter dated 30 December 2010, the council replied that they had reviewed the case but had not changed the decision.  The letter continued by stating that the case would be prepared and submitted to the tribunal service.  

8.	It would appear from the tribunal file that the case was not referred to tribunal until 21 November 2011, there being a note on the notification of appeal form “We believe this appeal has been submitted in July but no trace has been made.”  According to the claimant in his submissions to the First-tier Tribunal, during the period of delay Wychavon continually stated to him that they could take as long as they liked in submitting the appeal and that their internal resources were such that they had to externally source the preparation of the tribunal application.  Whatever the truth of this, and Wychavon has not had the opportunity to respond to this claim, the delay by Wychavon in notifying the appeal to the tribunal was wholly unacceptable.  I also note from the bundle of documents submitted by the claimant to the tribunal at the tribunal hearing that the reference to the tribunal only occurred after intervention by the claimant’s MP in November 2011.

9.	There is no excuse whatsoever for such delay by Wychavon.  Claimants can suffer severe hardship if a claim for benefit is refused.  The duty to initiate the appeal proceedings that might lead to the amelioration of that hardship is placed on the council whose decision is being appealed.  Independently of any special provision in the regulations, there is a duty on them to act with reasonable speed in forwarding notification of the appeal to the tribunal.  They cannot simply do it as and when they please and while some allowance may be made for temporary staff shortages or similar problems, a delay even from late December to July would be unacceptable, let alone one until the following November which is then only remedied after the local MP has intervened.

10.	The Local Government Ombudsman has made it clear in Complaint No 01/C/13400 against Scarborough BC that authorities should aim to refer all appeals to HMCTS within 28 days.  As I also pointed out in CH/3497/2005, a claimant is entitled under Article 6 of the European Convention on Human Rights to have his or her appeal heard within a reasonable time, and this could be particularly important in housing benefit cases where a delay could cost a tenant his home.  It is unlawful for a local authority or any other public authority to act (which includes a failure to act) in a way which is incompatible with a Convention right (Human Rights Act 1998, s.6(1), (6)).  The conduct of Wychavon in this case was wholly unacceptable and inconsistent with the proper conduct of this appeal.

11.	In addition, it appears to me that taking the administrative step normally required to commence proceedings before the tribunal is a duty of the relevant council which now falls within regulation 2(4) of the Tribunal Procedure (First-tier Tribunal) (SEC) Rules 2008 which provides that parties must help the tribunal to further the overriding objective and co-operate with the tribunal generally.  The overriding objective is defined in regulation 2(1) as dealing with cases fairly and justly and regulation 2(2) provides that this includes ensuring so far as practicable that the parties are able to participate fully in the proceedings and avoiding delay so far as compatible with proper consideration of the issues.  A failure for almost a year to take the simple administrative step needed to commence the proceedings, the tribunal already having jurisdiction (R(H) 1/07) clearly prevented the claimant from participating in the proceedings during that time and caused serious delay which was not compatible with the proper consideration of the issues.

12.	I now turn to the issues on this appeal and note that the council has chosen to make no submissions on it beyond requesting reasons for any decision.  

13.	First, it is said by the claimant that the tribunal refers in the statement of reasons to considering what the claimant and the council representative said, the council’s response to the appeal and 68 pages of evidence.  No reference is made to the fifty odd pages of documents and written submissions produced by the claimant at the appeal (actually 65 pages but the pagination has been altered in a way which makes it difficult to read). The record of proceedings notes that the additional bundle was handed in, but unusually it was not paginated and added to the file even after the hearing.  From the tribunal file, it would seem that when a statement of reasons was requested it was not included in the file sent to the judge and this may explain why it was not referred to in the statement of reasons.  Nevertheless, the absence of any reference to it in those reasons does give rise to the possibility that it was not considered or read by the tribunal at the hearing.  In the end it is unnecessary for me to decide whether the omission of any reference to it is so serious as to vitiate the entire decision as I have come to the conclusion that there is another error of law by virtue of which I should set aside the decision in any event.

14.	The second point raised by the claimant is that the council assured him that he the capital asset would be disregarded permanently provided it was used to buy a property.  I agree that that is what the council told him.  That misinformation may give him a claim against the council before the Local Government Ombudsman or just conceivably by way of a possible court claim for damages for negligent advice (I do not wish to be taken as encouraging any recourse to the courts).  However, the entitlement to benefit is a statutory one, and the council cannot, by making incorrect representations, confer an entitlement on the claimant which he would not otherwise possess.  This ground of appeal therefore fails.

15.	The third point is that any overpayment was caused by official error and the council should be bound by its errors.  Again, this is governed by the Housing Benefit Regulations 2006 and the Council Tax Benefit Regulations 2006.  Insofar as there have been overpayments, the council cannot recover them.  That is what the tribunal held and what the council accepts.  But that is because there are specific rules that prevent the council from recovering overpayments in the circumstances of this case.  There is no rule which requires it to go on making overpayments on an incorrect basis once the mistake is discovered.  As I have already said, if the wrong advice from the council has caused the claimant loss, that is for another forum and the problem cannot be resolved by awarding him benefits to which he is not entitled.

16.	The fourth point relates to the relevance of a letter from 2003 which may have suggested that the claimant did know of the relevant rules as to when capital would be disregarded.  I do not see how this can assist the claimant.  The tribunal found that he was an innocent party in this matter and that he did not contribute to the mistake by the council and did not know that he was being overpaid.  He is not now having to repay anything.  I cannot see how it can have influenced any other point that the tribunal had to deal with and it did not influence the tribunal against him in the area where it was relevant.

17.	The fifth point is the notional capital point.  Again this is irrelevant.  Notional capital reduction is only provided for in the rules about assessing capital where a person has deprived himself of capital with a view to obtaining benefit.  The claimant did not deprive himself of any capital with this in mind as the council conceded and the tribunal found.  There is no rule about notional diminution of actual capital.  It is necessary to look at all times and see what capital the claimant actually has.

18.	The final question is as to whether the claimant’s capital continued to exceed the capital limit at all material times.  Here the tribunal clearly fell into error.  Even if the claimant accepted that the property acquired was worth £200,000 and so his share of 10 per cent was worth £20,000, the tribunal judge still had to value his interest on the basis laid down in the Regulations, which was not the same as that on which the claimant clearly made his calculation.  Under regulation 47 of the Housing Benefit Regulations 2006 and regulation 37 of the Council Tax Benefit Regulations 2006, capital which a claimant possesses in the United Kingdom shall be calculated at its current market or surrender value.

19.	The claimant’s property was his beneficial interest under a declaration of trust dated 31 August 2010 made by his mother.   The trust relates to a freehold property in Pershore.  It would appear that the property had been owned in equal shares by the mother and another lady and the mother had taken a transfer of the property when buying out the other lady for £100,000, a sum which she acknowledged in the declaration of trust included contributions from her husband, her sons, her daughter and her son-in-law.  Only one page of the declaration of trust is to be found in the tribunal file (p.63) but the second page is also to be found in the documents submitted to the tribunal by the claimant.  The first page provides for the property to be held on trust for sale and to hold the net proceeds of sale and the net income until sale on trust for herself and those contributing to the buy out of the other lady as to 80 per cent for the mother and her husband, as to 10 per cent for the claimant, as to 5 per cent for his brother and as to the remaining 5 per cent for his sister and brother in law.  There is a covenant by the trustee that she would apply for a restriction to be entered on the register at the Land Registry that except under an order of the Chief Land Registrar no disposition of the property by her was to be registered without the consent in writing of each of the other beneficiaries.  There is also provision for keeping the property in repair and for the sharing of the costs of keeping it in repair in the same proportions as the beneficial interests.  There are also restrictions on carrying out non-essential maintenance and/or improvements.

20.	The question for the tribunal was, therefore, how much would the claimant’s beneficial interest in the property fetch if sold on the open market.  There is no provision for the surrender of his interest and no suggestion that anybody would pay for its surrender.  The statement of reasons states at paragraph 11:

“I did consider whether the value of the capital had gone down by virtue of being tied up in a joint venture in which he was a minority.  No-one had considered this issue before.  However, I had no evidence that the value was less than £20,000.00 and [the claimant] appeared content with that.”

21.	In my judgment, the tribunal had ample evidence that the value of the claimant’s share for these purposes was significantly less than £20,000.  The claimant clearly based his £20,000 estimate on the property being worth £200,000 and his having 10 per cent of that value.  The tribunal was not addressing the valuation required for benefit purposes, which was the open market or surrender value of his 10 per cent share at that time, very soon after the other lady’s share had been purchased taking into account all the difficulties a purchaser would have had in realising his beneficial interest in a family arrangement and the attitude of his family to any attempt by him to sell so soon (R(JSA) 1/02; R(IS) 5/07).  Nor was the tribunal considering that the amount in question also had to be determined on the correct basis, which was that of a very quick sale that would put the willing seller at a disadvantage and the willing buyer at an advantage, since the seller would be in need of immediate resources to meet his outgoings (R(IS) 2/90).

22.	This was explained by the claimant to have been a family investment for letting purposes.  If one asks the question, how much would be paid on the open market in the context of a quick sale for a 10 per cent interest under this trust, in the absence of evidence of a family buyer with the money to pay for the claimant’s interest and to pay the full 10 per cent for it, it is clear that the price would be far less than £20,000.  An outsider would be buying into a family concern, possibly involving a family who would not welcome his or her participation and who would not wish to change their plans to suit him or her.  The chances of being able to force a sale to realise the 10 per cent share would be negligible when the purpose of the trust to provide investment income was still capable of being realised.  It also would not be right to force the other parties to the trust to sell when this would involve their taking what would after expenses, and on a possibly forced sale, almost certainly be a loss on their investment at any time before there was a significant rise in the residential property market in the area.

23.	Had this case been pursued expeditiously, I would have considered referring the matter back to a First-tier Tribunal to determine the market value of the claimant’s beneficial interest.  This may in part turn on whether any other family member might at the relevant time in late 2010 have been willing and able to buy out the claimant’s share, and if so for how much.  There would also be the opportunity for expert evidence as to the value on the open market of such an interest, if an open market exists for such an interest.  Given the excessive delay in this matter being referred to the tribunal, however, combined with the likely absence of any proper evidence of the kind I have indicated in any event, it appears to me that I should simply deal with the valuation on the evidence now before me.

24.	There is no evidence that any family member would have bought the claimant’s interest for £20,000, or that any family member had the means or will to pay even a lesser amount of any significance for that interest.  It is not an investment that would be of any real interest to an outside investor.  The value is small and the investor would have no real control over how the property was dealt with except in the context of a breach of trust by the trustee.  Prices for property are calculated by reference to the prospects of capital growth and by reference to expected rental returns.  There is no evidence as to the expected net rental income after expenses and voids are allowed for.  At the relevant time it does not appear to have been let, as steps were being taken to refurbish it prior to letting.  In my judgment, the maximum that an outside investor would have been prepared to pay for such a 10 per cent interest under those circumstances would have been 50 per cent of value, or £10,000.  Allowing for a quick forced sale, I do not consider that more than £8,000 could have been obtained for the claimant’s share, from which 10 per cent must be deducted for expenses of sale, giving a valuation of £7,200.

25.	I therefore set aside the decision of the tribunal and the decision of the council and I remit the matter to the council to determine the amount of benefit to which the claimant was entitled after 8 November 2010 on the basis that the capital value of his beneficial share in the property was £7,200.  I see no reason to interfere with the decision of the council in respect of the period up to 8 November 2010 as it has paid benefit up to that date and there can be no basis on which it could recover it even if it were to supersede its own decision in respect of that period.  There is no point in it engaging on a wholly unproductive exercise.

26.	I note that the claimant had to give up his tenancy and move in with his parents.  His entitlement to benefit will therefore have ceased once the tenancy was given up.  If he were now to take a fresh tenancy of a home for himself and apply for housing and council tax benefit, the capital value of his share in the property should be ascertained on the basis described above.  The value of the property may have changed, or there may be other evidence not available to me.  It is possible that there would be no market at all for the claimant’s share on the basis of a very quick sale, in which case the open market value would be nil.  It is also possible, for example, that there may now prove to be a member of his family eager and willing to buy him out for £20,000 in which case the value would be £20,000.

(signed)	Michael Mark
		Judge of the Upper Tribunal

		30 January 2013