Secretary of State for Work & Pensions v Perkins & Anor

J U D G M E N T

1. SIR WILLIAM ALDOUS: Major Perkins lives in North Yorkshire. He is nearly 87 years old. From 1st April 1996 to 21st October 2001 he received housing benefit from the Ryedale District Council. The basis for those payments was that his income was below the necessary threshold, in that it consisted of his retirement pension and a part of his army pension to which he was still entitled.

2. When completing a review form in 2001 he disclosed that he had two bank accounts. The Council were only aware of one and sought an explanation as to the other. Major Perkins told them that his pensions were paid into one account and that regular gifts of £280 a month from his son, who lived in Australia, were paid into the other. The Council concluded that the gifts formed part of his income and therefore there had been an overpayment of housing benefit. Major Perkins did not agree. He asserted that the money given to him by his son was a gift and therefore did not form part of his income. He appealed against the District Council's decision.

3. Major Perkins appeared in person before the York Appeal Tribunal and gave evidence. In its decision dated 16th May 2003 it rejected his appeal, but accepted that Major Perkins had no dishonest intent and had not sought to evade his responsibilities. He had simply misunderstood the nature of the payments from his son. The Tribunal went on to hold that the Council were entitled to recover the sum of £7,750.15. In its decision the Tribunal said:

"The only items of income which can be disregarded are those which are listed in Schedule 4 to the Council Tax Benefit (General) Regulations 1992. There is no provision in that schedule to disregard the payments received by Major Perkins."

The relevant parts of Schedule 4 are as follows. Paragraph 13.1:

"Except where sub-paragraph (2) applies and subject to sub-paragraph (3) and paragraphs 33 and 34, [£20] of any charitable payment or of any voluntary payment made or due to be made at regular intervals.

(2) Subject to subparagraph (3) and paragraph 34, any charitable payment or voluntary payment made or due to be made at regular intervals which is intended and used for an item other than food, household fuel or, subject to paragraph (5), rent or ordinary clothing or footwear, of a single claimant or, as the case may be, of the claimant or any other member of his family or is used for any council tax or water charges for which that claimant or member is liable.

(4) For the purposes of subparagraph (1) where a number of charitable or voluntary payments fall to be taken into account in any one week they shall be treated as though they were one such payment.

(5) In subparagraph (2) -

(a) 'rent' means eligible rent less any deductions in respect of non-dependants which fall to be made under regulation 63 (non-dependant deductions);

(b) the expression 'ordinary clothing or footwear' means clothing or footwear for normal daily use, but does not include school uniforms, or clothing or footwear used solely for sporting activities."

Major Perkins appealed to the Social Security Commission. That appeal came before Mr Commissioner Mark Rowland. Again, Major Perkins appeared in person. The Council were represented by their housing benefits officer and the Secretary of State for Work and Pensions did not appear.

4. The Commissioner, in his decision dated 21st January 2004, rejected Major Perkins' argument that the payments from his son were not income. He went on to hold that the Tribunal had erred in concluding that there was no provision in Schedule 4 permitting voluntary payments. Having set out paragraph 13 of the Housing Benefit (General) Regulations 1987, the Commissioner said this in paragraph 9:

"If one disentangles sub-paragraphs (1) and (2), one can see that only £20 pw of voluntary payments is disregarded where either (a) the payments are intended to be used for food, household fuel, rent or ordinary clothing or footwear or (b) the payments are actually used for food, household fuel, rent or ordinary clothing or footwear, whatever the intention behind the payments. The whole of any payments is disregarded if either (a) the payments are both intended and used for a purpose other than paying for food, household fuel, rent or ordinary clothing or footwear or (b) whatever the intention behind the payments, the payments are actually used for council tax or water charges. This calls for some investigation of the intention behind, and the use of, voluntary payments."

That statement of the task of the tribunal is correct. The Commissioner then went on in paragraph 15 in this way:

"The purpose of paragraph 13(2) and its counterparts therefore becomes clear (although the rationale for treating payments used for water charges and council tax in the way the provisions do is not as clear as it was in the days of community charge when a person in receipt of income support was still liable for a proportion of the community charge). It is to enable charitable or voluntary payments to be made to a claimant for items other than basic essentials and housing costs without there being any effect on entitlement to an income-related benefit payable to meet those basic essentials and housing costs."

The Commissioner then came to apply that construction of the regulations to the facts. He said this:

"16. The problem that arises in cases like the present is that the precise purpose for which the payments are made is not expressed and it is difficult to anticipate how they will be used or to trace how they have been used. However, it does not, in my view, follow that the purpose and use cannot be determined from the surrounding circumstances. It seems to me to be reasonable to make three assumptions in such cases. Firstly, a claimant will give priority to paying for basic essentials and housing costs over less important items. Secondly, the 'applicable amount' (not counting any 'eligible housing costs' in an income support case) is sufficient to meet the basic essentials. Thirdly, a person making a voluntary payment to a claimant intends the payments to supplement other income -- ignoring for this purpose possible entitlement to an income-related benefit -- and that the claimant receives it on that basis and so pays for the basic essentials and housing costs using the other income first and then using the voluntary payment.

17. On that basis, a voluntary payment may be presumed to be used for basic essentials and housing costs to the extent that the 'applicable amount' plus any 'eligible rent' exceeds the amount of other income, unless it can be shown that the voluntary payment was earmarked in some way for another purpose and was used for that other purpose. Equally, however, it seems to me that a voluntary payment must be presumed to be intended, and used, for other purposes to the extent to which it represents income in excess of the 'applicable' amount' plus any 'eligible rent'.

18. In the present case, Mrs Calvert told me, the whole of the claimant's rent has been 'eligible rent'. The amount of his pensions at 1 April 1996 just exceeded his 'applicable amount' plus his rent and, as the pensions and the 'applicable amount' are all index-linked, that is likely to have continued to be the case throughout the relevant period. It seems absurd to hold that the voluntary payments were intended or used to pay for the basic essentials and the rent, in circumstances where the claimant's other resources were sufficient. In my view, during any period when the claimant's pensions exceeded his 'applicable amount' plus his rent, the voluntary payments were intended and used for items other than food, household fuel, rent or ordinary clothing or footwear and so they fell to be disregarded under paragraph 13(2).

19. If the whole of the voluntary payments fell to be disregarded under paragraph 13, there was no overpayment during the relevant period and the claimant's award of housing benefit should not have been terminated. The claimant may have been wrong in assuming that the payments for his son were not 'income', but, by chance in the light of the facts of his particular case, he was substantially right in assuming that they should not affect his entitlement to housing benefit. However, Mrs Calvert very properly says that she wishes to check the figures and so I give my decision set out in paragraph 1 above."

It followed that the Commissioner allowed the appeal and set aside the order of the York Tribunal. The Commissioner gave the Secretary of State, who had not taken part in the dispute so far, permission to appeal.

5. Before coming to the appeal, it is necessary to deal with the point raised in the respondent's notice, which was argued by Miss Robertson who has appeared in this court on behalf of Major Perkins. She submitted that, in the context of this special jurisdiction, this court should not entertain an appeal by a party who did not make any submissions in relation to the decision under appeal. It was up to the Secretary of State to ensure that he was represented at the appropriate time. In support she relied upon The Secretary of State for Work and Pensions v Hughes (A Minor) [2004] EWCA Civ 16. I reject that submission. The Secretary of State's rights to appear at an appeal are governed by section 68 and schedule 7 to The Child Support, Pensions and Social Security Act 2000. I need not set them out as it was not submitted that the Secretary of State did not have a right to appeal. Miss Robertson submitted following the guidance given in Hughes, that this court should, in its discretion, refuse to hear the appeal.

6. For my part, I can see no reason why this court should not hear the Secretary of State's appeal when permission was given by the Commissioner. It would not be sensible to place the Secretary of State in the position of having to appear before the Commission every time the Council appeared when there did not appear to be any important point of principle involved. It would also be contrary to good sense to prevent the Secretary of State appearing in this court when a point of law of importance for this court to decide was to be considered. The Secretary of State could not have anticipated that the appeal to the Commissioners in this case would have led to the point that was actually raised.

7. There is a real difference between the facts in this case and the facts in Hughes. In any case, I doubt whether it would be right for this court to decline to hear the Secretary of State when permission to appeal has been given.

8. I therefore turn to the appeal. Mr Martin Chamberlain, who appeared for the Secretary of State, submitted that paragraph 13(1) sets out the basic rule, namely that only £20 of any voluntary or charitable payment may be disregarded. Subparagraph (2) was an exception to that basic rule. In circumstances where the voluntary payment was intended, and was used, for the items other than the items specified, which I will refer to as the paragraph 13(2) specified items, the whole payment could be disregarded. I agree. I also agree that it must be established, when considering paragraph 13(2), that the voluntary payment was both intended and was used for items other than the paragraph 13(2) specified items.

9. Mr Chamberlain criticised the way that the Commissioner had, in paragraphs 16 and 17, arrived at his conclusion that the payments from Major Perkins' son had been intended to be used and were used for items other than the paragraph 13(2) specified items. There was, he submitted, no warrant for making any presumptions or any assumptions.

10. I did not really discern a great deal of difference between that submission and the submission put before us on behalf of Major Perkins. It must be right that, when deciding whether payments were intended for a purpose and were used for a purpose, the tribunal should not make assumptions or presume anything. The tribunal should consider all the evidence in the context of the case. It can draw inferences from the facts if such inferences are warranted in all the circumstances. The tribunal should draw such inferences as it can. Thereafter it must decide, on the balance of probabilities, whether the voluntary payments were intended to be used for items other than the paragraph 13(2) specified items. If yes, it should go on and decide whether the voluntary payments were used for the purpose for which they were given.

11. In many cases there will be direct evidence that voluntary payments are intended to be used for a particular purpose. For instance, there might be a written statement or letter from the donor that the gift was to enable the donee to go on holiday or to pay for the running of a car. But the absence of such direct evidence does not prevent the tribunal being satisfied, on the balance of probabilities, that the donor intended that the gift should be used to pay for items other than the paragraph 13(2) specified items.

12. The tribunal should take into account all the relevant facts, which could include who the donor was, the relationship of the donor to the donee, the financial ability of the donor to pay for the paragraph 13(2) specified items, the knowledge of the donor as to the donee's financial ability, and whether the applicable amount was sufficient to meet the basic essentials. The tribunal should also bear in mind the course of conduct between the donor and the donee. But, in the end, it is for the tribunal to decide whether there was an intention that the money should be used for items other than the paragraph 13(2) specified items and that was used for that purpose.

13. Mr Chamberlain submitted that in this case, if the Commissioner had made a finding of fact that the son had intended that the money, that had been given, was to be used for non-specified paragraph 13(2) items, and it had been used for that purpose, the Secretary of State would have no quarrel with the decision. He submitted that the findings of fact that had been made were not sufficient and that the matter should be remitted for further findings to be made. He accepted that in this case the Council, who had the conduct of the case, did not appear. In those circumstances, it may be that they had lost interest in recovering the money.

14. I am conscious that the Commissioner has considerable experience in deciding cases such as this one, and therefore the court should be cautious before concluding that he was wrong. Even though he expressed his views in forceful terms, using words such as "presumed" and "assumption", I can see no reason for concluding that he came to the wrong conclusion. I believe that he could have drawn the inferences that he did and there is some support in the third sentence in paragraph 18 of his decision for believing that he did base his conclusion on inferences.

15. This was a peculiar case with peculiar facts and should not be taken as a precedent in other cases. The applicant is in his mid-80s and the tribunal held that he had been honest when making his applications. He had two pensions which were sufficient to cover the paragraph 13 specified items. His income also included monthly gifts of about £280 from the son. It seems that at no time did the District Council consider it right to find out whether the gifts were intended to pay for items other than the paragraph 13(2) specified items. For that reason, and because Major Perkins was representing himself, the evidence as to intention and use was not as clear as it might have been, but I believe that there was just sufficient to enable an experienced commissioner, Mr Commissioner Rowland, to come to the conclusion that he did. In doing so he took advantage of the fact that he actually saw Major Perkins at the hearing and that he heard what he had to say.

16. In this case Major Perkins had two bank accounts. The gifts were paid into one account and his pensions were paid into the other. The gifts were, according to Major Perkins, to cope with a variety of domestic expenses, as well as telephone accounts, car and house maintenance as they arose, BT account, RAC, pet insurance, Yorkshire Water, and for providing family assistance. In his words:

"My old age pension I have used for day to day expenses, but I would have had no means of coping with such indispensables as telephone, water, heating, RAC cover etc were it not for his [the son's] kindness."

I can see no reason why the Commissioner should not, in the peculiar circumstances of this case, infer that the son intended that his gift of money to his father was to enable him to enjoy items that he could not afford to pay out of his pension income. It is difficult to see why a son, such as Major Perkins' son, intended that the gift should be used to pay for the paragraph 13(2) specified items. As Major Perkins said, the money was intended to be spent on such things as telephone accounts, car and house maintenance, RAC, pet insurance and Yorkshire Water. Why, in circumstances, where his father had sufficient income to pay for such items as heating, light, rent, clothing and council tax and water charges, would the son give £280 per month to pay for such items?

17. As to user the evidence is not very clear. The Commissioner saw the bank accounts. He heard Major Perkins. It seems that Major Perkins' old age pension was used for day to day expenses. However, the Commissioner held in paragraph 10:

"The payments from the claimant's son were paid into a different account from the one into which his pensions were paid. He explained to me that that was because they replaced his earnings and he had originally had the second account in order to keep his earnings separate from his pensions. His bank statements show direct debits on both accounts. In particular, as his correspondence with the local authority had suggested, his telephone bills, RAC subscription, and water charges were paid out of the account into which his son's payments were made and rent payments were paid out of the other account. There are card purchases on both accounts. No electricity bill was paid during the period to which the statements before me relate but the claimant had said that household fuel was paid using his son's payments."

The fact that a man in his mid-80s used a bank account into which the gifts were paid to pay water charges and household fuel appears at first sight to indicate that the gift of money was used to pay for paragraph 13(2) specified items. But when viewed in the context of the two bank accounts, the way that they were used, the age of Major Perkins and the ability of Major Perkins to pay those items from other bank accounts, it would be wrong for this court to interfere with the conclusion reached by an experienced commissioner. I repeat again that he saw and heard Major Perkins. He was in the best position to come to conclusions of facts. I believe the facts were such that he could have come to the conclusion he did. I would therefore dismiss the appeal.

18. LORD JUSTICE SEDLEY: I agree. I would add only that the second of the three matters described by the Commissioner as assumptions may be different from the other two. The first and third concern the recipient's use of donations and the donor's intention in making them. So long as these are case-specific they may be legitimately derived by inference from the evidence before the tribunal. I agree with my Lord that this is in substance what the Commissioner has done here. What is impermissible, as Mr. Chamberlain rightly submits, is to introduce general assumptions to the same or similar effect.

19. But the second of the so-called assumptions mentioned by the Commissioner concerns the relationship of the "applicable amount" to the cost of essentials. This may well be a mixed question of fact and law. The element of law arises from the statutory purpose of the applicable amount which, in broad terms, is to quantify the needs to be met. I would think that this purpose may legitimately enter, in a proper case, into any inference that the tribunal is considering drawing about the intended use of a voluntary of charitable payment.

20. Although therefore the Secretary of State has established the point of principle that he came here to establish, I too would dismiss his appeal.

21. LORD JUSTICE WARD: I agree.

ORDER: Appeal dismissed.