DEPARTMENT OF HEALTH AND SOCIAL SECURITY

Transcription

1 SOCIAL SECURITY COMMISSIONER S DECISION ISLE OF MAN COURTS OF JUSTICE DEEMSTERS WALK, BUCKS ROAD, DOUGLAS DEPARTMENT OF HEALTH AND SOCIAL SECURITY Appellant -v- MR. A Respondent At the Appeal hearing before me on 27 th May 2009 Mr. David Braide, Deputy Director (Pensions & Income Support), appeared on behalf of the Department of Health and Social Security [ the Appellant ]. Mr. David Cannan M.H.K. and Mr. B, the son of Mr. A [ the Respondent ] who has now passed away, appeared on behalf of the Respondent s estate. The background to this matter is as follows. The Respondent lived at [the Property] which he owned. It is a working farm. His son Mr. B took over farming it in Another son, Mr. C, also lives there. In 2007 the Respondent applied for and was granted Income Support for respite care at a Residential Home. However, his health deteriorated to such an extent that he became a permanent resident at the Nursing and Residential Home. As a result, [the Property] was valued for the Appellant by the Valuation Office Agency. The valuation figure of 265,000 which was treated as income in accordance with regulations caused the Respondent s claim for Income Support to be disallowed. An Appeal was lodged against this decision on the grounds that the amount of money said to be my father s income from [the property] is an unrealistic amount of money for a working farm and the type of land concerned. Farm accounts are available to be seen. By way of response, the Appellant submitted that At regulation 48 it details how to treat any premises which were a person s dwelling prior to them becoming a permanent resident in a residential home. The Adjudication Officer therefore calculated the [Respondent] s income in accordance with the regulations and disallowed the claim as his income was in excess of those laid down by the regulations. 1

2 The Social Security Appeal Tribunal [ the Tribunal ] allowed the Appeal. Statement of Material Facts and Reasons for Decision:- I refer to the On 15 October 2008 the Tribunal allowed the appeal against the [Appellant s] decision that [the Respondent] was not entitled to Income Support. This appeal was part-heard on 23 July 2009 and then adjourned for a period not exceeding 3 months to enable the [Appellant] to obtain the specified further information detailed below. The Tribunal reconvened on 15 October 2008 and the hearing was completed. The [Respondent] was represented at both hearings by one of his sons, Mr. B, who was accompanied on each occasion by David Cannan, MHK. The [Appellant] was represented at the first hearing by Mr. Q. Kelly and at the adjourned hearing by Mrs E. Dalrymple, due to Mr. Kelly s indisposition. The reason for the [Appellant] s decision was that the [Respondent] is the legal owner of [the Property], which is a working farm. Until 21 September 2007, the [Respondent] resided there with 2 of his children, Mr. B, who is aged 56 and another son, who is aged 45, both of whom continue to reside there and to farm the land. The property has been in the family since The [Respondent] retired from farming in On 23 February 1981, Mr. B took over the running of the farm. He moved into the farmhouse to live with his father and younger brother in January The farm s accounting year end is 31 March. The Tribunal did not have the accounts for the year ended 31 March 2008, but the net profits for the previous three years were 11,213 (2004/5), 8466 (2005/6) and 2977 (2006/7). The [Respondent] was born on 2 March The Tribunal did not have formal, medical evidence as to his health but this was described by Mr. B, and was not disputed by the [Appellant]. Mr. B explained that his father s health was failing, both physically and mentally. The family had tried to keep the [Respondent] at [the Property]. Mr. B cared for his father in the mornings and 2 of his sisters looked after him during the rest of the day. Despite the [Respondent] s frailty and the round-the-clock care he required, the family did not apply for Attendance Allowance. The [Respondent] s health had deteriorated dramatically, however, both mentally and physically, resulting in several lengthy hospital admissions and respite care at a Nursing Home. Over the following months, the [Respondent] s health deteriorated to such an extent that the family were no longer able to care for him at home and he became a permanent 2

3 resident at a Nursing Home. Mr. B explained that the [Respondent] is no longer mentally capable of managing his affairs or of giving instructions of a legal nature. This was not disputed by the [Appellant]. It is not known whether an Enduring Power of Attorney or a Receivership Order is in place. The family had previously applied for and been granted Income Support while the [Respondent] was in the Nursing Home for respite care. On 22 October 2007, an application for Income Support on a permanent basis was applied for. The Government Valuer was requested to value the property and 2 valuations were provided, one for the farmhouse and one for the outbuilding alone dated 13 December 2007 for 270,000, and one for the property as a whole dated 23 January 2008 for 400,000. At the first hearing, the Tribunal were concerned that, in providing the valuation, no account seemed to have been taken by either the [Appellant] or the Government Valuer of the provisions of the Agricultural Holdings Acts, the effect of these provisions upon the rights of Mr. B and their consequences upon the value of the property. The Tribunal is obliged to reach a decision according to the facts that exist at the time of the hearing, not according to how they might be some time in the future. As at the 23 July, the Tribunal s view was that Mr. B was a statutory tenant and that the farm could not be sold unless the procedures required by the Agricultural Holdings Acts had taken place. It was felt also that the [Appellant] should be given the opportunity to explore these issues. For this reason, therefore, the Tribunal adjourned the matter to enable the [Appellant] to make further enquiries, directing that a revised valuation be provided by an appropriate Isle of Man Valuer with specialist local knowledge of agricultural holdings and that, in preparing its instructions for the valuation, the [Appellant] should take legal advice as to the information to be provided to the valuer regarding the holding. The [Appellant] did take legal advice but from its own legal section apparently rather than from the Attorney General s Chambers and so, on 12 August, the [Appellant] wrote to Mr. B to say, Further to the recent Tribunal meeting I have been in touch with our Legal Section to discuss the points raised. With regard to the reference made to the Agricultural Holdings Act 1969 from the information supplied at the Tribunal and from Mrs S this does not apply as you do not have a tenancy. 3

4 The [Appellant] then provided a valuation dated 19 August 2008 from the Valuation Office Agency ( VOA ) in England, which contained the following assumptions: I have assumed that the customer is a willing seller of the property and that he is solely entitled to it. I have assumed that there are no tenancies affecting the property. No details of any tenancy have been disclosed on Form A90 (2/99) and the Department of Health and Social Security has informed me that no tenancies exist. The Agricultural Holdings Act 1969 would therefore not apply. The valuation stated the Valuation Method to be:- The Isle of Man Government Valuer valued the property at 400,000 and I have taken that as my starting point. I have deferred that value for a period of one year to allow the current occupiers time to curtail their farming operations without undue disruption. Most agricultural activity takes place on an annual cycle and the period of one year would in my opinion be reasonable. I have also made a deduction of 5% to reflect any objects to the sale that the current occupiers might pursue, despite their having no legal justification to object to it. The VOA s report concluded by stating that, I am of the opinion that the current market value of this property as at 4 March 2008 is 360,000. The Tribunal rejects this valuation, as it is clear Mr. B is a statutory tenant. On 6 October, the VOA provided a further valuation, to be read in conjunction with the valuation report dated 19 August By this time, the [Appellant] appears to have consulted the Attorney General s Chambers, as the report states that the VOA had been requested to undertake a further review of my valuation of the above property on the assumption that the property is tenanted by the customer s son You have requested that I make the assumption 4

5 that a Land Court appointed under the Agricultural Holdings Acts would confirm that the occupation by the customer s son constituted a protected agricultural tenancy. The VOA s report dated 6 October 2008 continued to take the 400,000 valuation given by the Isle of Man Government Valuer as its starting point. The report goes on to state that, I have estimated a rental value for the holding and capitalised that rent for a term of 20 years to reflect the life expectancy of a 55-year old male, but does not state what the estimated rental value is. The report writer adds I have similarly deferred the reversion to the vacant possession capital value for a period of 20 years. I have made an end allowance of 10% to reflect the risk that vacant possession might not be obtained after that period or that the landlord might be required to pay compensation to the tenant under the Agricultural Holdings Act 1969 on his quitting the holding I confirm that in my opinion the true open market value of the customer s interest (entirety share) on the basis set out above as at 4 March 2008 is 283,500. The VOA does not set out the specific calculations arising from the valuation method quoted above. The report assumes that the [Respondent] could sell all or part of the farm now, subject to the statutory tenancy. The assumption ignores Section 8 of the Agricultural Holdings Act 1969, which sets out special provisions where a landlord desires to sell. If the [Respondent] were to offer the farm for sale without having carried out these procedures, he would be liable to conviction and fine. The alternative, which is an even lengthier procedure, would be for the [Respondent] to give Mr. B notice to quit and for the matter to come before the Land Court. Thus any attempt to assess the market value of the farm now is academic. On the facts existing on 15 th October, the farm is not saleable. For the purposes for which the Tribunal was sitting, the logical conclusion therefore is that it does not have a value, as it is a capital asset that, under the current circumstances, cannot be sold. Furthermore, the [Respondent] is not mentally capable of giving instructions. At the resumed hearing on 15 October, Mrs Dalrymple confirmed the [Appellant] s acceptance of the fact that a statutory tenancy exists. Mrs Dalrymple also conceded, very fairly, the Attorney-General s chambers advice that it would not be a quick process to sell the farm. The Tribunal cannot be expected to determine the matter on a hypothetical basis as if the procedures preliminary to any sale had been carried out. It can determine a matter only on the facts as they stand at the date of the hearing. As matters stand at the hearing the property cannot be sold. On this basis the Tribunal therefore allows the appeal. 5

6 The Appellant lodged an Appeal against the Tribunal s decision. An expanded submission of its reasons for appealing was as follows:- 1.1 I give notice of my intention to apply for leave to appeal to the Social Security Commissioner from the decision of the appeal tribunal given in the case of Mr. A against the appeal tribunal s decision of 15 th October 2008 (registration number 264/08/S/***) on the grounds that the decision was erroneous on a point of law because the appeal tribunal acted unreasonably in arriving at its decision, being a decision no other Tribunal could realistically have arrived at given the information which the Tribunal had to hand on 15 th October I maintain the original decision given in Mr. A s case by adjudication officer Mr. Quentin Kelly was correct in that the current market value of Mr. A s former home at [the Property], as provided by the UK Valuation Office Agency (VOA), was determined correctly having regard to all circumstances and current market conditions as they relate to the property, and the use of such value was right and proper in assessing Mr. A s entitlement to income support from 22 nd September 2007, being the date when Mr. A was admitted into the Nursing Home on a permanent basis. 1.3 In particular, I am making application for leave to appeal and the appeal itself on the ground set out in the following paragraphs. 2.1 In determining Mr. A s entitlement to income support under the Income Support (General) (Isle of Man) Regulations 2000 (the Regulations ) there is a requirement (under regulation 48) for the Department to obtain the current market value of the farmhouse and land at [the Property]. Regulation 48 provides that.where a person to whom regulation 17 applies (persons living in residential accommodation) owns any premises which were the dwelling he occupied as his home immediately before that regulation applied to him, those premises shall be treated as income. Regulation 48 applied to Mr. A as the premises at [the Property] were the premises occupied by Mr. A as his home immediately prior to him entering residential accommodation. It should be noted Mr. A did not satisfy any of the criteria listed within schedule 8 of the Regulations (Capital to be disregarded) which would have allowed for [the Property] to be disregarded in assessing entitlement to income support. 6

7 2.2 In order to be able to fully apply regulation 48 and calculate the weekly income to be taken into account in respect of [the Property] there was a requirement, in the first instance, to obtain a valuation of [the Property] and this was undertaken by the Isle of Man Government Valuer. However, the valuation provided was questioned by the Tribunal at its first hearing on 23 rd July 2007 and the [Appellant] was directed to obtain a further valuation from an Isle of Man Valuer with specialist local knowledge of agricultural holdings. This second valuation produced a valuation which is 50% greater than the initial valuation. 2.3 Having obtained a valuation of the holding at [the Property] the [Appellant] is required to determine its current market value. Such a determination requires the services of a body who has the relevant knowledge, experience and expertise in such matters and the [Appellant] approached the VOA who is recognised as being the professional body capable of undertaking such a task for the purposes of assessing entitlement to social security benefits. On being provided with the current market value by the VOA, the [Appellant] used this value to determine Mr. A s entitlement to Income Support. It should be noted the valuation figure for [the Property] provided to the VOA was the value supplied by the Government Valuer (being the lesser of the two values) and further consideration of the second specialist valuation may still be required. The basis of this appeal does not require, at this point in time, the VOA to have provided a current market value based on the second specialist valuation. 2.4 The Tribunal has chosen to disregard the professional advice and opinion submitted by the VOA and is of the view, without having recourse to seek any other source of professional advice in this field, [the Property] cannot be sold at present and therefore does not have a current market value. The reason cited by the Tribunal for arriving at their decision is that [the Property] has a sitting tenant who is actively farming the land and as a result of this it would take a considerable amount of time to realise a sale of the farm. 2.5 In determining the current market value of [the Property] the VOA has taken into account numerous factors, including the fact the farm has a sitting tenant, and appropriate discounts which take account of these factors have been applied to the actual value of the holding which, having been valued at 400,000 by the Isle of Man 7

8 Government Valuer, has been determined by the VOA as having a current market value of 283,500. The correspondence received from the VOA in this matter is attached as Annexes 1, 2 and Within its findings the Tribunal makes reference to the VOA s report and the fact the report does not state what the estimated rental value is and does not set out the specific calculations arising from the valuation method quoted. I would suggest these comments infer the Tribunal believed they did not have to hand all the information which they would have liked. And yet, if this was the case, no adjournment was considered necessary by the Tribunal in order for further information to be requested from the VOA, which might well have provided the Tribunal with the clarity and understanding of how the VOA arrived at the current market value of [the Property]. 2.7 The Tribunal also state Furthermore, the [Respondent] is not mentally capable of giving instructions. Presumably, this comment has been made to show Mr. A could not be regarded as being a willing seller of the property. If Mr. A s failing health means he was not capable of acting for himself then another person would have to be appointed to deal with his affairs and it is that appointee who would be regarded as the willing seller. Whether or not Mr. A, or his appointee, is a willing seller is of no relevance anyway as in determining the current market value of any asset the assumption has to be made the person is a willing seller. 2.8 In addition, the Tribunal has stated it cannot be expected to determine the matter on a hypothetical basis as if the procedures preliminary to any sale had been carried out. What the Tribunal appears not to have taken account of is the selling any capital asset will, in many cases, always have some form of preliminary procedures attached to the sale before any cash transaction occurs, whether it be the sale of a car, house, land, etc. However, on any given date that asset will always have a current market value, the amount of which will be affected by any difficulties associated with the sale. In the case of Mr. A those difficulties have been taken into account by the VOA in determining the current market value of [the Property]. 2.9 The income support regulations do not require a person to be in possession of actual cash on any given date as a result of selling a capital asset for the value of that asset to be taken into account. Regulation 56 provides that Capital which a claimant 8

9 possesses in the Isle of Man and United Kingdom shall be calculated at its market or surrender value If a person is in need of raising cash he may well be able to do so by way of a loan on the strength of the current market value of an asset in the knowledge that when sold it can expect to realise funds of an amount at least equal to the loan If the Tribunal did not agree with the value provided by the VOA it should, at the very least, have directed the [Appellant] seek a second determination from another source. However, given the VOA is the body assigned to providing current market values in respect of capital assets for the purposes of assessing the entitlement to social security benefits it is difficult to imagine any other body (if, indeed, there is one) who might be able to provide a similar determination I contend the decision arrived at by the Tribunal has no merit and its logic is flawed. [The Property] is capable of being sold today, as it was at the date of the Tribunal hearing. The Tribunal has produced no evidence to show [the Property] has a current market value of zero and although it has expressed the view On the facts existing on 15 October, the farm is not saleable the Tribunal has failed to appreciate the owner of the property or land can sell an option to purchase that asset in the future or, alternatively, borrow funds, using the asset as security, provided the current market value reflects the asset is not immediately realisable, which is exactly what has been taken into account by the VOA in making its determination Accordingly, I assert the [Appellant] is right to accept the professional opinion given by the VOA that [the Property] does have a current market value and that value can be used for the purposes of assessing entitlement to social security benefits. The Chairman of the Tribunal granted leave to appeal. The relevant legislation for the purposes of this Appeal is as follows. Regulation 18(4) of the Income Support (General) (Isle of Man) Regulations 2000 [ the Regulations ] states that residential accommodation means accommodation for a person which is provided 9

10 (a) pursuant to Part III of the National Assistance (Isle of Man) Act 1951 (an Act of Tynwald); or (b) under section 2 of the Nursing and Residential Homes Act 1988 (an Act of Tynwald) (residential care homes, mental nursing homes and nursing homes) applies, except premises referred to in section 1(1)(c)(ii) of that Act (maternity homes). Regulation 48(2) states that Subject to paragraph (3B), where a person to whom regulation 17 applies (persons in residential accommodation) owns a dwelling which was his home immediately before he became a person to whom that regulation applies, that dwelling, unless it falls to be disregarded as capital of his by virtue of (paragraph 5 or paragraph 6 (as the case may be) of Schedule 8), shall be treated for the purposes of this regulation as income. Regulation 48(3B) states that paragraph (2) shall not apply for any period or periods (not exceeding 13 weeks in the aggregate) during which the claimant takes such steps as are reasonable in the circumstances to let or dispose of the premises. Regulation 56 states that Capital which a claimant possesses in the Isle of Man (and the United Kingdom) shall be calculated at its current market or surrender value Paragraph 5 of Schedule 8 relates to Premises occupied by a partner or relative of a single claimant or any member of the family as his home where that person is aged 60 or over or is incapacitated or by the former partner of a claimant as his home (other than where the former partner is a person from whom the claimant is estranged or divorced). Paragraph 6 of Schedule 8 relates to The former home of a claimant who is now in residential accommodation where that home is now occupied by a person who used to care for the claimant. Section 8 of the Agricultural Holdings Act 1969 [ the Act ] provides the following:- (1) Where a landlord desires to sell an agricultural holding he shall first give a notice in writing to the tenant or statutory tenant offering to sell the same to the tenant or statutory tenant thereof at a stated price and in the event of the parties failing to negotiate an agreed purchase price within a period of three months from the service 10

11 of the notice the landlord shall have the right to sell the property on the open market subject to the existing tenancy or statutory tenancy, and the provisions of this Act. (2) Any landlord who fails to comply with this section shall be guilty of an offence and shall be liable (a) on summary conviction to a fine not exceeding 5,000; or (b) on conviction on information, to a fine. I have given this matter very careful consideration. The Tribunal reached its decision on the basis that [the Property] was not saleable as at the date of the hearing on 15 th October 2008 and therefore any attempt to assess its market value was academic. In my view, the Tribunal has erred in law in reaching such decision. Whilst it is clear that Mr. B was a statutory tenant and that section 8 of the Act does indeed set out special provisions where a landlord desires to sell, the Tribunal appears to have overlooked the following:- (i) the assumption has to be made that the Respondent was a willing seller; (ii) the property was saleable, first of all to Mr. B by the provision of a written notice; and (iii) thereafter, in the event of the parties failing to negotiate an agreed purchase price within a period of three months from the service of the notice, the farm was saleable on the open market subject to the statutory tenancy. The farm therefore does have a value. In these circumstances, the decision of the Tribunal must be set aside. I consider the real issue in this case to be the current market valuation figure of the farm (from which the tariff income is calculated in accordance with the Regulations). 11

12 The Tribunal obviously had concerns over the level of the figure provided by the Valuation Office Agency, e.g., its report does not state what the estimated rental value is and does not set out the specific calculations arising from the valuation method quoted. I agree with the submission made on behalf of the Appellant that these comments infer the Tribunal believed it did not have to hand all the information it would have liked. I am of the view that further information is required in relation to the level of the farm s current market value and so I direct that this case be referred to a differently constituted Tribunal for the same to be determined on the basis of the evidence and argument presented before it. Inter alia oral evidence will be needed from the Valuation Office Agency. This 8 th day of July 2009 Alastair A. Montgomerie SOCIAL SECURITY COMMISSIONER 12