Ownership of capital dispute

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    I have a case which me and my manager do not agree over and would like any opinions.

    Claimant is in council accommodation and we have been paying benefit since November 2002.

    She is a single person, pensioner, not in receipt of any pension credits, so claim is a standard claim.

    HBMS have thrown up an inconsistency in her declared capital. She has an investment bond with £20,000 in it which we were not advised about.

    After investigation the information we were given was that the money belonged to her son which was deposited to her account in September 2002 after he and his brother sold a house, for her to look after so he did not spend it during the time he was studying to be a doctor – he is now also a pilot.

    The son provided a letter from his solicitor dated September 2002 saying following the instructions of the son and brother, here is the completion statement and cheque.

    On this my manager made the decision that the capital was hers and subsequently the claim was cancelled back to the start.

    She has now appealed and I have asked for further information to try to establish who is the beneficial owner.

    Basically, there was no written instruction, the claimant was given it to look after, but it belonged to the son and his brother. There was no timescale involved either, the money was available to the sons as and when they wanted it – but only the claimant could withdraw it as it was in her sole name. The son says that she was not able to use the money as she wished and the only withdrawal made was to pay £10,000 to his brother (there was originally £30,000 in the account), and that was with his prior agreement.

    The money was returned to the son in July 2006 following the investigation, and now I have a new claim as well as the appeal.

    The son also advised that the claimant did have power of attorney over his finances for several years when he lived abroad, but again no evidence available and I am assuming from the way this was written, that it was many years ago, prior to the period in question.

    Any opinions on who is the beneficial owner of the capital?



    It has always been my view that such capital must belong to the customer (unless there was some compelling documentary proof otherwise). It seems unrealistic to expect to decide who owns what. Stainsby referred me to some caselaw on a pevious thread that suggested it was nothing like so cut and dried. I will try and find it for you.


    I had a similar appeal recently. In my case the customer claimed that she was looking after £35,000 for her sister. Apparently the agreement between them was that the claimant would invest the capital and could use the interest generated, but not touch the capital. Apparently the claimant’s sister gave her the money to look after it because she (the sister) would spend the interest on jewellery(!).

    The CAB initially advised her, and they quoted a passage from the CPAG Welfare Handbook which said words to the effect that a loan granted on the condition that you only use the interest do not touch the capital should not be counte as your capital because the capital element is not at your disposal.

    This appeared to rely on a CD R(IS) 12/86, which relied on a hideously complicated trusts law case (Barclays Bank v Quistclose) to come to the conclusion that a loan granted on certain conditions should not be treated as capital.

    I did some research and found a couple more CDs which you might find useful:

    CSB 1137/85 – quistclose trust unlikely to be found in private/family transactions – normally only found in commercial situations

    R (IS 5/99 – Loan to be taken into account until immediate obligation to repay arises.

    R(IS) 8/92 – loan to be repaid on a specific date still available to the borrower

    R(IS) 6/03 – need for immediate obligation to repay before loan can be disregarded as capital. ( also reported as Morrell v Sec State for Work and Pensions – CA)

    Anyway the conclusion I came to was that the capital should be treated as the property of the claimant throughout because there was not enough evidence to suggest that a trust had been created, particularly the complicated kind found in the quistclose case. We also relied on the fact that the money was in the claimant’s name at all times and was therefore available to her. She had been given no set date on which to repay it.

    In your case I think the solicitor’s statement may provide an insight into the nature of the agreement. Analyse it carefully to see whether there is any possibility of a trust being created here.

    An interesting point was that I trawled through the regs for ages trying to find a reg which said that capital held by the claimant on trust for another should be disregarded, or something to the same effect as the passage quoted by the CAB about loans granted on a condition. I could find nothing in the regs to suggest that money held on trust should be disregarded! I think as a principle of law it probably should be though.

    Sorry for long post, hope it is of some help!

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