Upper Tribunal (Administrative Appeals Chamber)

[2009] UKUT 22 (AAC) (30 January 2009)

 


IN THE UPPER TRIBUNAL Appeal No. CIS/3308/2008

ADMINISTRATIVE APPEALS CHAMBER

Before Judge S M Lane

Decision: My decision is given under section 12(2)(a) and (b)(i) of the Tribunals, Courts and Enforcement Act 2007:

I SET ASIDE the decision of the Manchester Tribunal, held on 10 July 2008 under reference 946/08/01008, because it involved errors on points of law.

I REMIT the case for rehearing before a differently constituted First Tier Tribunal (Social Entitlement Chamber) and DIRECT that the tribunal conduct a complete rehearing.

REASONS FOR DECISION

1. The claimant, who is the appellant, brings this appeal with my permission. He is appealing against the Manchester tribunal's decision to disallow his appeal from the Secretary of State's decision of 19 October 2007 that he was not entitled to Income Support from 4 September 2007 because he possessed actual capital in excess of the prescribed amount.
2. The Secretary of State supports the appeal on the grounds I identified when granting permission on 17 November 2008. These grounds related to the nature of a loan as a chose in action, its valuation, and whether the appellant deprived himself of capital for the purposes of obtaining benefit.
3. The facts relevant to the appeal, as accepted by the tribunal, were that the appellant, who had been in receipt of Income Support since 2002, received a pay out of £70,000 in the beginning of 2007 due to the compulsory purchase of his house. In his claim for Income Support in September 2007, he reported that he and his wife had a small amount of money invested in ISA/PEPs and a very small amount of savings. He had loaned £40,000 to his daughter, who was an unemployed, homeless lone parent whom they later discovered also had a drug habit. He loaned it to her because she was thinking of buying a house (though he had also given explanations inconsistent with this). The appellant and his wife asked her no further questions about the house or how she intended to finance the balance, and made no efforts to follow up on the purchase. The tribunal was satisfied that the appellant knew about the capital limits for Income Support and considered that he had £13,164.70 actual capital after reasonable expenditure and that he had notional capital of £40,000 equating to the loan. They found that he had a significant operative purpose is depriving himself of that capital.
4. The classification of the money as actual or notional capital will depend on what the appellant's intention was in transferring the money to his daughter. It may have been a loan (as the tribunal found), a gift or a transaction in which his daughter was simply a bare trustee holding it for her father absolutely.
5. If the appellant loaned money to his daughter, he would obtain in its place a chose in action, which is a legal right to sue on the debt. This would have a value, and comprise actual capital. The value of the chose would be based on what it would be worth if sold to a third party. The Secretary of State has submitted, correctly in my view, that a third party would not pay full value for a loan which he might be unable to recover in full.
6. Alternatively, if the tribunal found that the appellant loaned the money with no expectation of getting it back, he would, in effect, have reduced the value of the chose to £nil. The question of notional capital and deprivation of capital would then become relevant.
7. A further possibility is that the appellant simply gave the money to his daughter outright. If so, the tribunal would have to decide whether this was a deprivation of capital for the purposes of regulation 51 of the Income Support (General) Regulations 1987.
8. Final possibilities are that that his daughter is a bare trustee, or that the whole transaction was simply a sham.
9. The tribunal which re-hears the appeal will have to decide which of the alternatives is correct and the consequences which follow, keeping in mind that the representative submits that he had no significant operative purpose of securing entitlement to Income Support under regulation 51 of the Income Support (General) Regulations 1987.
10. The question of whether the appellant deprived himself of capital is one of fact for the tribunal, to be established on the evidence before them. As long as they have weighed the evidence in coming to their conclusion on this issue, and given adequate reasons, their decision on the facts in not appealable. That the representative and appellant might disagree with the tribunal's conclusions is neither here nor there.
11. Before any re-hearing, the decision maker should request a special valuation from Jobcentre Plus Special Operations, Capital Valuations, Room 3S25, Quarry House, Quarry Hill, LS2 7UA. It may be necessary for a First-tier judge to make directions to ensure that this happens.

[Signed]

S M Lane

Judge of the Upper Tribunal

12/02/2009