i would put in a late appeal. there are no residence or presence conditions for bereavement benefit.
having looked at the claim-form on-line i very much doubt that a 'defective claim' decision could be correct, and a refusal of NiNo on 'right to work' grounds, i think, applies to applications for NiNos for employment purposes, not benefit purposes. this distinction is explicitly indicated in the SNAP guide (see link), which relates to employment related NiNo applications, although i'm not entirely certain of current procedures for NiNo applications. www.parliament.uk/commons/lib/research/briefings/snbt-04281.pdf
can't see that your client can be legally deprived of bereavement allowance entitlement on the basis outlined in your post, and CH4085/07 is relevant esp. para 27.
had a quick look at the DMG - very poor and thin guidance imo, and the decision on your case may have been reached by the DM following it - good job it's not law, eh? : )
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