Mr. John Bergelin (Hansard, 17 January 1985)

§ Mr. John Watts (Slough)

I am glad to have this opportunity of raising the case of my constituent, Mr. John Bergelin, and the difficulties that he had in his dealings with the Department of Health and Social Security.

I am a new boy to the case, because its origins go back to 1980, when it was first taken up by the late Sir Ronald Bell. Upon his sad demise, it was then pursued vigorously by my hon. Friend the Member for Beaconsfield (Mr. Smith). It was as a result of boundary changes in June 1983 that I became involved.

The essence of the case is as follows. First, between June 1980 and April 1981, the DHSS wrongly refused to entertain a claim in respect of interest on a second mortgage that had been taken out to fund renovations to Mr. Bergelin's house. Secondly, the Department failed to make payments direct to the Leeds Permanent building society in respect of the principal mortgage on the property, despite its having been requested to do so by Mr. Bergelin. Thirdly, in consequence of the arrears that accrued on both mortgages, Mr. Bergelin was forced to sell his house in order to meet his commitments, and to make a quick sale at a price well below its proper market value. Fourthly, his creditworthiness was undermined as a result of the arrears that accrued from the Department's failure to pay him the allowances that were his due. As a consequence, he was unable to raise funds that he had intended to use to purchase a business.

The case was referred to the Parliamentary Commissioner for Administration by Sir Ronald Bell, but the Commissioner was unfortunately unable to find in Mr. Bergelin's favour. From my reading of his report, that was principally because Mr. Bergelin was unable to provide documentary proof of his instructions to the Department which he claims the Department failed to carry out. I raised the matter last year with my hon. Friend the Member for Brent, North (Dr. Boyson), the then Minister of State, who gave long and careful consideration to the case but was ultimately unable to take the matter any further, for reasons that I shall explain.

I have sought this further opportunity to give the case an airing because Mr. Bergelin does not feel that he has had justice, and I am not satisfied that the loss and distress that has been suffered by Mr. Bergelin and his family is not the result of maladministration, for which he is entitled to be compensated.

I shall go through the facts of the case in more detail. In 1977, Mr. and Mrs. Bergelin bought a house for £18,500 with a mortgage of £12,500 from the Leeds Permanent building society. In 1978, they took out a second mortgage from Armitage Securities Limited in order to finance substantial renovation works. Mr. Bergelin worked as a self-employed credit manager, and became involved with a vending machine company called Flic A Mint Limited in which he made a personal investment of £3,000. Subsequently he learnt of Fraud Squad investigations into the company's affairs. I stress that there was no suggestion of any investigation into Mr. Bergelin's part in the company.

As a result of the failure of the company, Mr. Bergelin lost his investment and about £7,000 which was due to him 634 for work which he had done for the company. As a consequence of those problems, he ran into difficulties in meeting his mortgage commitments. In November 1979 he started work as credit manager for a company in Slough.

Sadly, arising from the strain of his financial problems and his continuing need to be involved in attempting to solve the problems of Flic A. Mint, coupled with the ill-health of his wife, which resulted in two major operations in 1980, Mr. Bergelin was unable to concentrate fully on his work, and in May 1980 he was asked to leave the company.

Before the loss of his employment, Mr. Bergelin advised both the Leeds building society and Armitage Securities of his financial difficulties. The Leeds building society accepted from him post-dated cheques to meet his commitment, but Armitage Securities was not prepared to do so. He therefore concluded that he could meet his obligations only by selling his house to raise the necessary funds.

In March 1980, Mr. Bergelin was offered £45,000 for his house, but unfortunately that sale fell through because of difficulties encountered by the would-be purchaser. Armitage Securities issued proceedings against him. In May 1980 the court adjourned the possession order for 60 days to allow him to complete a sale. At that stage he needed about £20,000 to clear his debts and intended to use the remaining £25,000 of sale proceeds to purchase a shop.

After Mr. Bergelin lost his job on 2 June 1980, he signed on at the Department of Employment. On 3 June 1980 he was interviewed by the Department of Health and Social Security office in Slough. He advised the interviewing officer of his mortgages, both that with the Leeds building society and the second with Armitage Securities. He was advised that the interest content of the Leeds mortgage could be paid by supplementary benefit but that the second mortgage was not eligible. He was asked to obtain from the Leeds building society confirmation of the amount outstanding, and of the interest rate applicable. He telephoned the building society and the following day received a letter with the details requested. The letter also advised him to consider whether to ask the DHSS to make payments direct to the building society. Accordingly, he forwarded the letter to the DHSS with the request that direct payments should be made to the society as suggested.

In November 1980 Mr. Bergelin received a summons from the Leeds building society for non-payment of his mortgage. That was the first intimation he received that the direct payments, which he had asked the DHSS to make, had not been made. Because of pressure from his major creditors and his need to sell his house to meet his obligations, he reduced his asking price from the £45,000 that he had hoped to obtain. In August he received an offer of £39,950, but to achieve a quicker sale he first reduced the selling price to £35,000 and finally accepted a cash offer of £30,000. That is well below the sums that he was previously offered. Contracts for the purchase were exchanged in February 1981.

By that stage Mr. Bergelin had commenced negotiations to buy a shop in Camberley and, because there were inadequate proceeds from the sale of the house, he arranged a loan with Charterhouse Securities. To save expense both to himself and, ironically as it seems to him now, to the DHSS, he decided that he and his family would camp in a tent on a campsite at Taplow until the purchase 635 of the business was completed. Accommodation went with the business. All the family's possessions were placed in store in Camberley.

For reasons of time, I shall not go into detail about the disputes which arose with the DHSS over removal costs, storage charges and assistance with the costs of heating while the family was camping. Suffice it to say that the sad outcome was that, because Mr. Bergelin and his family did not receive what was their due—that was accepted subsequently by the Department—he was unable to pay the storage charges, because he used the funds available to him to buy bottled gas for heating. The storage company was not prepared to wait any longer, and his possessions were sold at auction. Meanwhile, the finance for the purchase of the business at Camberley was withdrawn because the finance company became aware of the arrears that had accrued to the Leeds building society and Armitage Securities.

Through that sorry sequence of events, Mr. Bergelin lost his home, the majority of his personal and household possessions, and any immediate prospect of being able to establish himself in business.

The DHSS disputes, first, that Mr. Bergelin ever requested direct payment of interest to the Leeds Permanent building society, and further disputes that he mentioned the existence of the second mortgage before March 1981, or that he was advised that a second mortgage was not eligible for assistance. When the Ombudsman considered the case, he could find no record in the papers of the Department of the request for direct payment, nor any mention of the second mortgage until March 1981. Therefore, in the absence of documentary evidence, the Ombudsman was unable to uphold Mr. Bergelin's claim. But the Ombudsman's report concluded: I cannot say with certainty that Mr. Bergelin did not mention the second mortgage to the local office before 31 March 1981. The Ombudsman records that when Mr. Bergelin was interviewed he said that the instruction to the Department regarding direct payments was either written on the letter dated 3 June 1980 from the Leeds building society, or was contained in a covering letter. He is clear that he advised the Department of his wishes for direct payments to be made, and of the existence of his second mortgage obligation, at his first interview on 3 June 1980.

However, at the time of the Ombudsman's investigation, Mr. Bergelin did not recollect the precise method which he used to convey his wishes. Nor could he produce documentary evidence. Subsequently, he has confirmed that the method he employed was a covering letter, and he has produced to me a copy of the letter dated 4 June 1980 from him to the Department, which bears the Department of Health and Social Security date stamp of 5 June 1980, as does the letter from the Leeds building society that he forwarded to the Department.

Clearly we must consider whether this copy letter is genuine. I hope that I am not naive about such matters; when I discussed it with Mr. Bergelin, I asked him whether it could be a fabrication that he had produced subsequently to give credence to his case. But in reply, apart from giving me an absolute assurance that that was not the case, he made the valid point that if he was prepared to be dishonest and to manufacture documents to support his case, would it not have been in his interests to have done so at the time when the Ombudsman asked him 636 to produce documentary evidence, rather than some considerable time later when he sought my assistance with his case?

Mr. Bergelin's letter to the Department reads as follows: Further to my interview of 3 June 1980 I enclose herewith the documents requested and would kindly ask that you make payment of my first mortgage direct to the Leeds Permanent Building Society as requested/suggested in their letter of 3 June 1980 in view of the arrears. Regarding the second mortgage with Armitage Securities taken out for essential renovations and they are now pressing for payment. I was advised that you would not consider this matter. I enclose herewith the papers in respect of same, together with receipts for work carried out and as they are now taking legal action I would ask that you give this matter further consideration and advise me in due course. It was the production to me of that copy letter that led me to write to my hon. Friend the Member for Brent, North (Dr. Boyson), who was then Minister of State, on 19 January 1984. I concluded my letter thus: It is my view that Mr. Bergelin has suffered injustice and financial loss. I consider the Ombudsman might have drawn a different conclusion if the additional information"— by which I meant the letter— had been available for his consideration.…I would ask you to review this case carefully in the light of the additional information and to consider whether some recompense should be made.

My hon. Friend the Minister of State considered the case with the care that those who know him would expect of him. I had the opportunity to discuss the matter with him at some length. However, he felt unable to take it further in the absence of the original letter of 4 June 1980, either in Mr. Bergelin's records or in those of the Department. I understand my hon. Friend's reluctance to accept that the Department was at fault in the absence of totally conclusive evidence, but it seems that this places an impossible burden of proof upon my constituent, for there is no reason why he should have the original of a letter which he wrote to the Department. Such a letter would properly be in the records of the Department. Neither do I accept that the failure to find the letter in the Department's records provides any conclusive proof either that no such letter ever existed or that no such letter was received by the Department.

This is not to suggest that I suspect any overwhelming incompetence by the local DHSS office. Like other offices up and down the country, it is required to administer on behalf of many thousands of claimants an unwieldy and complex social security system, which, thankfully, we now have under review. It would be no surprise to me if on occasion mistakes are made or documents go astray.

In my dealings with the local office over the past 18 months I have been impressed by the readiness in many instances of that office to recognise when a mistake has been made and to provide a remedy. I like to think that I enjoy excellent co-operation with the manager and his staff in providing relief to many of my needy constituents.

The essence of my complaint is that in Mr. Bergelin's case the whole of the burden of proof is required to rest on him. He has not been given the benefit of reasonable doubt. There is no doubt that he has suffered great distress and financial loss. In my view, he has not received justice.

§ The Minister for Social Security (Mr. Tony Newton)

My hon. Friend the Member for Slough (Mr. Watts) has indicated in his speech that this case has been 637 the subject of considerable and, indeed, anxious, consideration by successive Ministers in the DHSS. Of course, I have had an opportunity to study not only the papers concerning Mr. Bergelin's unfortunate circumstances but the correspondence that passed between my hon. Friend the Member for Brent, North (Dr. Boyson), my predecessor as Minister of State, and my hon. Friend as Mr. Bergelin's Member of Parliament.

I well understand the reasons why my hon. Friend has felt it right to bring this case before the House. Even though I am afraid I cannot be as encouraging as my hon. Friend would like, Mr. Bergelin has been fortunate in the vigour with which my hon. Friend and his predecessor as Mr. Bergelin's Member of Parliament have pursued this difficult case.

As my hon. Friend said, the circumstances of Mr. Bergelin's claim were also the subject of a thorough investigation by the Parliamentary Commissioner in October 1981. Again, I have read the report. It is from that point that I should start to explain the position as the Department sees it. The complaint made to the parliamentary commissioner was that, the local office in Slough refused to make Mr. Bergelin an allowance of Supplementary Benefit towards the repayment of a second mortgage on his house. As a result he had to sell the house at well below market value. The complaint went on to say that Mr. Bergelin lost approximately £15,000 on the sale of his house, as my hon. Friend said, and incurred an additional expense of £7,000 in court costs. I acknowledge that those are not circumstances that any one could contemplate with equanimity. They would leave people feeling considerable sympathy for a person in the position in which Mr. Bergelin found himself.

As I understand it, and as my hon. Friend said, in 1977 Mr. Bergelin purchased a house in Slough with the assistance of a £12,500 mortgage. In November 1979 he took out a second mortgage. I understand that the purpose of the second mortgage was to make improvements to the house and, I am advised, in part to pay creditors of a company with which he was connected.

In June 1980, Mr. Bergelin became unemployed and made a claim for supplementary benefit. It is the normal practice of the Department where a mortgage or mortgages are declared to ask claimants to produce details of them, to enable their correct entitlement to benefit to be determined. There is common ground between myself and my hon. Friend about the fact that there is no record in my Department that Mr. Bergelin indicated either verbally or in writing at that time that he had more than one mortgage. Consequently, his benefit entitlement was calculated on the details he provided of the first mortgage and was paid on that basis.

The Department's submission to the parliamentary commissioner in connection with the investigation, stated: we can find nothing in our records to support Mr. Bergelin' s allegation that he mentioned the second mortgage when he was seen on 3 June 1980 or 9 December 1980. Nor is there any evidence that he mentioned it in any of the several letters he sent to the Department during that time". My Department's records show that the first time we were made aware of the second mortgage was 30 March 1981, at which point Mr. Bergelin's benefit was reassessed to take account of the additional commitment. I recognise that my hon. Friend has acknowledged this point, but I 638 should like to place it firmly on the record that the full arrears of benefit amounting to £1,094.60 were paid on 27 April 1981.

The decision to pay the arrears in full was a decision by the independent adjudicating authorities and was based on the understanding that the second mortgage was solely for improvements to the house. To make the record absolutely clear, I must say that, had the adjudicating authorities been aware that part of the money was used to pay creditors of a business, their decision might have differed and a lower sum of arrears might have been paid. I do not wish to place a great deal of emphasis on that point. I wish simply to make it clear that, in terms of recompense for the arrears that were discovered, once the Department was clear that a second mortgage was involved, the decision and the Department's action following the decision of the independent adjudicating authorities would not be regarded as unfair or ungenerous.

Mr. Bergelin contends also that he requested my Department to pay that portion of his benefit attributable to his first mortgage direct to his building society. He claims that, as we did not do so, we contributed to his arrears of mortgage payments and ultimately to the financial problems that led him to sell his house at less than what he believes to be the market value.

As my hon. Friend rightly outlined, the points at issue seem to be as follows. First, did the Department fail to act on information provided by Mr. Bergelin about a second mortgage in June 1980? Secondly, did we fail to respond to his request to pay his first mortgage direct to the building society? Thirdly, did the late payment of benefit arrears on 27 April 1981 contribute to the financial difficulties that led him to sell his house? Fourthly could the Department be considered responsible for the price at which Mr. Bergelin sold his house?

On the first point, as I have said, the parliamentary commissioner conducted a full investigation and produced his report, a copy of which was sent to my hon Friend's predecessor as his Member of Parliament on 30 December 1982. The commissioner found that there was no evidence to suggest that Mr. Bergelin had told the Department that he had a second mortgage and concluded that it would be unrealistic to expect the Department to ask prospective claimants such a specific question as second mortgages are not a common occurrence among supplementary benefit claimants.

On the second issue, the parliamentary commissioner found that, having kept full details of his mortgage, including details of substantial arrears, from his building society it was unwise of Mr. Bergelin to assume that his first mortgage was being paid direct without specifically checking the position with it.

My hon. Friend has drawn my attention to a copy of a letter which Mr. Bergelin says he sent to the Slough local office on 4 June 1980. I can only repeat that the Department has no record of receiving such a letter. Moreover, I must also observe that, although Mr. Bergelin communicated with the Slough local office on several occasions, there is no evidence that at any time did he ask why he had not received a reply to such a letter. In those circumstances, I feel I must refer my hon. Friend as he himself quoted it, to what my predecessor said in his letter to my hon. Friend on 16 May 1984. He said: In the absence of an original document, in Mr. Bergelin's records or ours, I do not feel able to take the matter any further".

639 On the third point, it is clear that Mr. Bergelin's financial problems pre-dated his claim to supplementary benefit. Indeed, at the time of his claim in June 1980 Mr. Bergelin stated that it was his intention to sell his property because he was being pressed by his creditors. Therefore, although there was a delay in the payment of benefit in respect of the second mortgage, it cannot be said that that led to him selling the house.

The fourth question, of the market value of the house at the time of the sale, is something over which the Department could not have had any influence.

As I have said, I very much understand why my hon. Friend has raised this case and I have real and genuine sympathy with the extremely difficult financial position in which Mr. Bergelin found himself. But the fact remains that the case has been very thoroughly investigated by the 640 parliamentary commissioner, who concluded that there was no evidence of maladministration on the part of the Department and it is, I think, common ground that in terms of payment of benefit Mr. Bergelin has been paid his full entitlement.

I have listened very carefully to what my hon. Friend has said, including what he said about the letter of which, indeed, he had sent my predecessor a copy, but I think I must say, in order to avoid building up false hopes, that I cannot realistically hold out the prospect of being able to go beyond what my hon. Friend the then Minister of State wrote to my hon. Friend. In that sense, I feel that I cannot this evening add further to what has been said before.