R(IS) 15/96

Mr. M. Rowland	CIS/600/1995
31.8.95
Capital - monies held in a building society - whether an actual resource
Capital - award by Criminal Injuries Compensation Board calculated by reference to financial loss -  whether “a payment made in consequence of any personal injury”
On 29 April 1994 the claimant, who was then in receipt of income support, was paid £24,500 by the Criminal Injuries Compensation Board. He immediately paid that sum to his building society in reduction of his mortgage and advised the local office of his action. The adjudication officer reviewed the award and disallowed benefit from 26 April 1994 on the ground that the claimant possessed notional capital exceeding £8,000. On 24 June 1994 the building society repaid the £24,500 to him and on 2 July 1994 the claimant paid the sum into an instant access account. On 19 July 1994 the claimant appealed and on 17 October 1994 the tribunal allowed the appeal. The tribunal found that the claimant had not disposed of his money for the purpose of securing entitlement to income support and that when he paid it into the instant access account it was for the purpose of creating a trust so that it fell to be disregarded under paragraph 12 of Schedule 10 to the Income Support (General) Regulations 1987. The adjudication officer appealed. On 5 December 1994 the claimant transferred the sum into a three year bond. On behalf of the adjudication officer it was argued before the Commissioner that (a) the tribunal had given inadequate reasons for rejecting the argument that the claimant, by paying the sum to his building society, had deprived himself of capital for the purpose of securing entitlement to income support; and (b) no trust had been created by the payment to the building society on 2 July 1994 so that the monies held in the instant access account should have been treated as an actual resource of the claimant.
Held, allowing the appeal, that:
1.	the tribunal were entitled to find that the payment on 29 April 1994 had not been for the purpose of securing income support;
2.	the repayment by the building society had not been subject to any obligation to create a trust. The tribunal had erred in law in finding that the claimant created a trust by his payment on 2 July 1994. For practical purposes the investing member of a building society is in the same financial position as the customer of a bank. He is a creditor for the amount of the money in the account and his debt is a chose in action and an actual resource. Although the value of a debt may be less than the amount owed, where money is held by a bank or building society in an account from which it may be withdrawn at any time, the value of the debt will be the amount owed because the money will be paid on immediate demand. If the money is available on demand but subject to an interest penalty, the amount available will reflect that penalty. Thomas v. CAO (reported as R(SB)17/87) considered;
3.	the terms of the bond purchased on 5 December 1994 included one preventing withdrawal during its term. The market value of that chose in action would be less than the amount invested but would in the circumstances be in excess of the capital limit. Further the difference in value would fall to be considered under the notional capital rule;
4.	the award by the Criminal Injuries Compensation Board was a payment made in consequence of any personal injury within paragraph 12 although its amount had been calculated by reference to the claimant’s loss of earnings and lowering of living standards;
5.	the claimant’s award of income support fell to be revised only with effect from 24 June 1994 from which date the claimant was not entitled to income support.	

DECISION OF THE SOCIAL SECURITY COMMISSIONER
1.	I allow the adjudication officer’s appeal. The decision of the Bexleyheath social security appeal tribunal dated 17 October 1994 is erroneous in point of law. I set that decision aside and substitute my own decision which is that, although there were grounds for review of the existing award of income support with effect from       29 April 1994, the award falls to be revised only with effect from 24 June 1994, from which date the claimant was not entitled to income support. The effect of that decision is that income support is payable to the claimant up to 23 June 1994.
2.	At the oral hearing of this appeal, the adjudication officer was represented by Mr. Leo Scoon of the Office of the Solicitor to the Departments of Social Security and Health. The claimant was represented by Mr. Roland Haigh of Gravesham Citizens Advice Bureau.
3. 	The history of the case may be shortly stated. On 29 April 1994 the claimant received a cheque for £24,500 in respect of compensation from the Criminal Injuries Compensation Board.	He immediately paid that cheque to the Woolwich Building Society to reduce the capital outstanding on his mortgage. The claimant was in receipt of income support and on 4 May 1994 he wrote to the local office of the Benefits Agency in the following terms:
“I have received compensation in the amount of £24,500 from the Criminal Injuries Compensation Board. It has been confirmed to me by said Board (namely Mr. McClean and Mr. Foster) that the DSS has been reimbursed their dues and that the above sum was therefore mine to spend.
I therefore paid the whole £24,500 off my mortgage thus relieving the burden of interest payments from the DSS down to £59.61 per month and allowing me to look for lower paid jobs and thus considerably improving my chances of employment. 
I hope that you agree with the use of my compensation which I considered to be our best option and that you will continue to support me financially in my continued yet enhanced quest for full-time employment.”
On 16 May 1994 an adjudication officer decided that the claimant was not entitled to income support from 26 April 1994 “because he is treated as possessing notional capital in excess of the prescribed limit of £8,000”. In the light of that decision the claimant managed to persuade the building society to return the £24,500 to him on   24 June 1994. On 2 July 1994 he paid that money into a “Prime Gold Account”. On 19 July 1994 the Benefits Agency received an appeal against the adjudication officer’s decision. On 17 October 1994 the tribunal allowed the appeal, holding that the claimant was entitled to income support from 29 April 1994. Their decision was notified to the parties on 1 November 1994. The adjudication officer applied for leave to appeal and payments under the tribunal’s decision were suspended by the Secretary of State. On 5 December 1994 the claimant transferred the compensation in the “Prime Gold Account” to a Woolwich “3 Year Fixed Rate Bond”. On 6 December 1994, the tribunal chairman gave the adjudication officer leave to appeal.
4.	The relevant legislation may also be set out very shortly. By virtue of section 134(1) of the Social Security Contributions and Benefits Act 1992 and regulation 45 of the Income Support (General) Regulations 1987, a person is not entitled to income support if he possesses capital in excess of £8,000. However, paragraph 12 of Schedule 10 to the 1987 Regulations provides that, in calculating a person’s capital, there shall be disregarded:
“Where the funds of a trust are derived from a payment made in consequence of any personal injury to the claimant, the value of the trust fund and the value of the right to receive any payment under that trust.”
Regulation 51(1) of the 1987 Regulations provides:
“A claimant shall be treated as possessing capital of which he has deprived himself for the purpose of securing entitlement to income support or increasing the amount of that benefit except-
(a)	where that capital is derived from a payment made in consequence of any personal injury and is placed on trust for the benefit of the claimant; or
(b)	to the extent that the capital which he is treated as possessing is reduced in accordance with regulation 51A (diminishing notional capital rule).”
5. 	It is the application of the legislation to the facts that has given rise to the difficulties in this case. The adjudication officer’s decision of 16 May 1994 was made on the basis that, by paying the money to the building society on 29 April 1994, the claimant had deprived himself of that sum for the purposes of obtaining income support. Therefore, it was said that regulation 51(1) applied. At the hearing before the tribunal, the adjudication officer first advanced a different argument. She submitted that, between 29 April 1994 and 24 June 1994, the claimant retained the compensation as an actual capital resource as the fact that the money was paid back to him showed that it was available to him “on application”. Mr. Scoon did not challenge the tribunal’s rejection of that submission and, although I am not sure about the tribunal’s reasoning, I think their conclusion was right. It seems fairly clear to me, as I think it was to the tribunal, that the claimant was lucky to be able to persuade the building society administratively to treat the payment on 29 April 1994 as an “overpayment” and to refund it. Had they refused, he could not have insisted. In those circumstances, the fact that the money was repaid does not show that it was available “on application”. I would add that if the money had been available “on application” the claimant would not have possessed it as actual capital but would have been treated as possessing it as notional capital under regulation 51(2) of the 1987 Regulations. 
6.	I therefore turn to the local adjudication officer’s original argument and to    Mr. Scoon’s submissions on this appeal.  Mr. Scoon’s first argument in respect of the period from 29 April 1994 to 23 June 1994 was that the tribunal had given inadequate reasons for their decision, which was to the effect that the claimant was not to be treated as still possessing the compensation as a notional resource under regulation 51(1). I do not accept that submission. The chairman recorded the following (among other) findings of fact: 
“When he was working he had lived in tied accommodation. As a result of armed robberies at his work (an off licence) he finished with that job and lost his accommodation. He had to find a property to live in and at that time he was working at the head office doing various jobs and was able to afford a £38,000 property. Sometime thereafter, he lost his job at head office and had to go on income support. It was not pressing that he paid off the mortgage inasmuch as there were no arrears owing but [the claimant] felt that it would secure his future to pay a considerable portion off his mortgage. Moreover, his compensation was calculated on the basis of his losing his home and it seem appropriate to disperse the funds for that purpose. He also felt that it would improve his job prospects if his outgoings were reduced. He further felt that it would also reduce his burden on the DSS because they would have to pay less interest on his mortgage.”
When explaining their decision, the chairman recorded:
“The tribunal then considered the adjudication officer’s original decision namely that the monies had been deposited in the manner described and whilst they were not actual capital they could be held to be notional capital. The tribunal did not find that the significant operative purpose of the transaction was to secure benefit. For the reasons outlined above, the tribunal felt that the purpose of the transaction was to secure [the claimant’s] future and to reduce the burden on the Department for his mortgage payments. Although he had been receiving income support for some time, he was not aware of the rules and regulations of, as he put it “misappropriation of funds”. He expressed the view, and the tribunal has sympathy with it, that the DSS and the CICB had liaised with each other prior to his payment being made and he should have been made aware of the consequence of any dispersement of funds at the time they were paid out to him. Nevertheless he was not given any advice and proceeded to pay off his mortgage in the manner described for the reasons already explained. Those reasons do not constitute a significant operative purpose for the purpose of obtaining benefit.”
It seems to me that, as Mr. Haigh submitted, the tribunal’s reasoning was perfectly clear. The more difficult question is whether their reasoning was sound.
7. 	This was really Mr. Scoon’s second point. He submitted that the tribunal’s decision was inconsistent with the evidence. He pointed out that, at the very least, the last paragraph of the claimant’s letter of 4 May 1994 showed that he was aware that the amount of compensation he received was likely to affect his entitlement to income support and that, if that was so, he hoped that the effect of disposing of it would be that he would receive more income support than he would have had he not disposed of it. He then referred to R(SB) 12/91, in which the Commissioner said at paragraph 14:
“If the obligation to repay does not mature for several years, or, as in the case of the usual mortgage of house property, there was no need to repay the sum borrowed, provided the agreed interest in capital repayments are kept up, then any premature repayment of indebtedness will be a voluntary act constituting a deliberate choice. And if there is a choice, then the question will arise as to whether a significant operative purpose, albeit not necessarily the predominant purpose, was to secure supplementary benefit or any increase thereof (R(SB) 38/85; R(SB) 40/85).” 
Clearly, therefore, the claimant deprived himself of capital when he sought to reduce his mortgage. However, as the Commissioner said, one must go on and consider the purpose of that deprivation. Not every disposal of an asset by a claimant brings regulation 51(1) into play.
8.	In R(SB) 38/85, the Commissioner said at paragraph 22:
“If the tribunal are satisfied that the claimant has deprived himself of a resource, they must then go on to consider whether he deprived himself of that resource for the purpose of securing supplementary benefit or increasing the amount of such benefit. If that was the claimant’s purpose, I direct the tribunal that it matters not that he also had another purpose. The tribunal should not accept the suggestion, put forward in numbered decision CSB/28/1981 (on Commissioner’s file no. CSB/31/1981) at paragraph 17 (unreported) that the question to be asked is was the securing of supplementary benefit, or obtaining an increase of such benefit, the claimant’s predominant purpose? Suppose a claimant with supplementary benefit inherits a large sum of money and proceeds to gamble with it and incur losses. Someone warns him that if he continues in this way he will be back on supplementary benefit and he replies ‘if I lose, that is my idea’. His predominant purpose in gambling with the money would obviously be to win at gambling. But it would be open to the adjudicating authority to decide on these facts that another purpose was to obtain supplementary benefit. Again, suppose that a claimant has assets of, say, £1,000 above the prescribed limit, and applies this money on a buffet wedding party and two days later, having spent sufficient to bring herself just below the prescribed limit, applies for supplementary benefit. The predominant purpose might be held to be to have a wedding party. But a subsidiary purpose could well be held, on these facts, to be to obtain supplementary benefit.” (my emphasis)
In R(SB) 40/85, the Commissioner said at paragraph 10:
“It is not necessary for the purpose of securing, or increasing the amount of, supplementary benefit shall be the sole purpose, though it must be a significant operative purpose. For instance one can visualise a case of a man possessed of say £1,000 over the statutory limit whose resources fall short of his requirements to an extent that his £1,000 would make up the deficiency for twelve months. He might conclude that if he forthwith spends the £1,000 on carpeting his home from wall to wall he could start drawing supplementary benefit at once and thus be no worse off income wise and have the benefit of the carpeting. It would be legitimate to conclude that if such was his purpose he had deprived himself of £1,000 for the purpose of securing supplementary benefit, notwithstanding that another purpose was to have the house carpeted. In practice the case is unlikely to be so clear cut and the claimant with mixed purposes is unlikely to concede that the securing of supplementary benefit was an important purpose. Nevertheless if the evidence showed that the transaction had had the effect of securing this (apart from regulation 4(1) [the precursor of regulation 51(1) of the 1987 Regulations]) and that this was the foreseeable consequence of it and there was nothing more, a tribunal could legitimately conclude that the person’s purpose was to secure supplementary benefit. But there may well be other evidence e.g. that the existing floor covering was worn out, or that a member of the assessment unit was allergic to dust to the extent that wall to wall carpeting was medically advisable. I draw attention to paragraph 22 of the above mentioned decision R(SB) 38/85 in connection with the points made in this paragraph.” (my emphasis)
The words I have emphasised in each citation seem to me to make it clear that the tribunal in the present case were entitled to find that the claimant did dispose of his money for the purpose of obtaining income support but equally that they were entitled to find that the disposal was not for that purpose. As Mr. Haigh submitted, it was a matter for the judgment of the tribunal. I cannot say that they erred in law in reaching the decision they did.
9. 	However, on 24 June 1994 the claimant regained possession of the money and on 2 July 1994 he invested it in the Woolwich Prime Gold Account. Regulation 51(1) ceased to be an issue and the question was whether the compensation was to be disregarded as capital by virtue of paragraph 12 of Schedule 10. I find the tribunal’s reasoning for finding that the money should not be taken into account as capital from 24 June 1994 somewhat confusing. In one part of the reasons for their decision, the tribunal chairman recorded:
“Whilst the monies seem to have been handed back without any strings attached, the tribunal could not believe that the building society manager would simply hand those funds over unless she believed that they would be dispersed in whole or in part in payment of the mortgage. She had been told that upon advice, it should be put into a trust fund and that the mortgage will be better secured in that way. Upon that understanding the monies were refunded.”
Later, the tribunal chairman recorded:
“Once the monies came back into [the claimant’s] hands on 23 June 1994, it was for the purpose of putting the money into a trust. He had been advised to do this by the Citizens Advice Bureau. It was the condition upon which the funds were given back to him by the building society. It was the only method that [the claimant] had been told about which would not disentitle him from income support. Accordingly, he conceived the intention of putting the monies on trust at the outset. The tribunal then looked at paragraph 12 of Schedule 10 of the Income Support (General) Regulations 1987 which says that funds of a trust derived from a payment made in consequence of any personal injury to the claimant should be disregarded as capital. Looking at page 305 of Mesher it is not necessary for the trust to be set up before the compensation is received. The compensation was received back to him by the building society on 23 June 1994 and the fact that it was not immediately put into a trust was not fatal to [the claimant’s] case. He had conceived the necessary intention to set up a trust and thus the money, although it was in a gold account, was not an implied trust for that purpose. The tribunal therefore held that [the claimant] was entitled at all times to income support from 29 April 1994.”
10.	There is an inherent contradiction between the statements that the money was given to the claimant on 23 June 1994 (which, I think, should read 24 June 1994) “with no strings attached” and that it was a “condition” of the refund that the money was put in trust. I do not think that the evidence justified the finding that there was any such “condition”. The most that could be said is that the building society manager understood that the claimant would be financially better off in the short term if the money were held in trust and that both she and the claimant believed that paying the money into a building society account would achieve the desired result. One cannot reasonably infer from such an understanding that there was a duty upon the claimant, enforceable by the building society, to place the money on trust.
11.	In any event, as Mr. Scoon submitted as his third point, the claimant, and the tribunal, erred in believing that merely paying the money into a building society account would have the effect that the building society would hold the money on trust for the claimant. Where money is deposited in a bank, the receipt of the money on deposit account constitutes the banker a debtor to the depositor but not a trustee of the money for him (see Halsbury’s Laws of England, 4th Edition, Vol 3(1), 1989 re‑issue (para 149)). A building society may offer banking services but usually the relationship between a building society and depositors is different from that between a bank and a depositor, because those investing in building societies become members. Clause 6(a) of the Conditions of Issue of both the Prime Gold Account and the 3 Year Fixed Rate Bond provides:
“Investments in the Woolwich [Account] represent shares in the Society. Account holders are members of the Society bound by its Rules and these Conditions of Issue.”
An investing member of a building society has a claim on the assets of the society for the amount of his shares, subject to any losses incurred by the society, but with a right to participate in any profits (see Halsbury’s Laws of England, 4th Edition, Vol 4(2) (1992 re‑issue) para. 734). For practical purposes the investing member of a major building society is therefore in the same financial position as the customer of a bank; he or she is a creditor for the amount of money in the account. The building society is not a trustee for the investor.
12. 	In the course of argument, Mr. Scoon referred to Thomas v. Chief Adjudication Officer [reported as R(SB) 17/87] in which, dismissing an application for leave to appeal, the Court of Appeal (Stephen Brown and Russell LJJ) considered whether money held by a solicitor for a claimant was an actual resource of the claimant’s to be taken into account under regulation 5 of the Supplementary Benefits (Resources) Regulations 1981 or a notional resource to be taken into account under regulation 4(2) of those regulations (which was the precursor of regulation 51(2) of the 1987 Regulations). Russell LJ (with whom Stephen Brown LJ agreed) said:
“In my judgment, the possession of this money by the solicitor as the agent for the claimant was, in every sense of the term, possession by the claimant, and regulation 4 has no application to a situation where a solicitor holds funds on behalf of his client.	 In his decision the Commissioner drew a parallel, in my view, a perfectly legitimate parallel, between the position of a solicitor holding funds for a client and the position of a bank holding funds for the customer. For my part, I am abundantly satisfied that this £12,000, from the moment it came into the hands of the solicitor until he parted with it in purchasing the house, was a capital resource which it was the obligation of the claimant to disclose and was an actual resource within the meaning of regulation 5 as opposed to regulation 4.”
13.	The precise status of decisions of the Court of Appeal on applications, as opposed to appeals, may need to be considered in another case but I am content to assume that I am bound by the reasoning of Russell LJ. However, it has often been said that a judgment should not be construed like a statute. That must particularly be so where the hearing is brief (see the comments in Chaplin v. Boys [1968] 2 QB 1 in the context of interlocutory appeals) and I feel free to take the view that the reason that money held by a solicitor is an actual resource for income support purposes is not because the claimant is regarded as possessing that money in precisely the same sense as the solicitor possessed it. There is no hint of criticism by the Court of Appeal of the reasoning of the Commissioner whose decision was the subject of the application.
14. 	The Commissioner’s reasoning was slightly more sophisticated than that of Russell LJ. At paragraph 7 of his decision (on file CSB/296/1985), the Commissioner said:
“It was an actual resource because there is no difference in principle, in my view, between monies being held by a solicitor on behalf of a client and for example monies held by a bank or building society on behalf of a customer (when the bank or building society balance undoubtedly is to be regarded as an actual resource). Regulation 5 is not confined to provision of mere physical things but only covers the present rights of action (choses in action), such as that of a customer against his bank or a client against his solicitor. I am assuming, of course, that these are situations where the monies (subject to deductions for e.g. legal costs) are payable immediately.”
In my view the Commissioner’s analysis was correct and I do not believe that the Court of Appeal intended to disagree with it, even though Russell LJ expressed himself slightly differently. The value of a chose in action in the form of a debt may often be rather less than the amount owed but it seems to me that the point being made by both	the Commissioner and the Court of Appeal is that, where a solicitor holds money in a client account on behalf of a client or where money is held by a bank or building society in an account from which it may be withdrawn at any time, the value of the chose in action will be the amount owed, because there is no doubt that the money will be paid on immediate demand. This remains the case if the money is available on demand, subject to what is often known as “an interest penalty”, although the amount available will obviously reflect the penalty. It will be different where the solicitor has misappropriated the money or the bank or building society is insolvent, but those cases are happily rare and must be considered when they arise. 
15. 	In the present case, the claimant clearly had an actual resource from 24 June 1994 to 2 July 1994 while he had the money in his hand. The Prime Gold Account was an “instant access” account and therefore the claimant continued to have an actual resource, in the form of a chose in action equal in value to the amount of money in the account, from 2 July 1994 to 5 December 1994.
16.	However, the terms of the Three Year Fixed Bond include one that “no withdrawal may be made from the Bond during its term” although thereafter withdrawals may be made immediately without penalty. In those circumstances, there is a debt which is not payable until 5 December 1997. The current market value of the chose in action will be less than the amount invested in the Bond. However, it is clear to me that the value of the chose in action would have been substantially in excess of £8,000 up to now and probably will continue to be in excess of that figure for the duration of the term, even applying a “diminishing capital” approach similar to that suggested in R(IS) 1/91. Furthermore, when a claimant deprives himself or herself of one sort of resource and obtains in its place a resource of a lower value, regulation 51(1) comes into play in respect of the difference in value (CIS/494/1990). In any event, I am satisfied that the claimant is not now entitled to income support. 
17. 	As I see no reason to disturb the tribunal’s decision in respect of the period before 24 June 1994, and as I am satisfied that the claimant has had capital in excess of £8,000 since that date, I give the decision set out in paragraph 1. 
18.	Before leaving the case, I must deal with paragraph 2(c) of the adjudication officer’s grounds of appeal, in which it is claimed that the compensation in this case could not be regarded as “a payment made in consequence of any personal injury to the claimant” for the purposes of paragraph 12 of Schedule 10 because the claimant had once asserted that “... compensation was paid to me to make up for my loss of earnings and lowering of living standards ...”. As its title suggests, the Criminal Injuries Compensation Board makes awards only in respect of personal injury. The fact that the amount of the award was calculated by taking into account the claimants loss of earnings and lowering of living standards in consequence of the injury does not mean that the compensation could not be regarded as having been “made in consequence of any personal injury”.
19. 	At the hearing of this appeal, I expressed some concern that the local office had never informed the claimant of the terms of paragraph 12 of Schedule 10. The policy underlying that provision is obscure but if, as Mr. Scoon submitted, it is open to a claimant who is sui juris so to arrange his or her affairs as to be able to take advantage of it (and it is not obviously limited to those under disability), it seems the clear policy of the legislation (particularly bearing in mind the amendment to regulation 51(1) wrought by regulation 12 of the Income Support (General) Amendment No. 5 Regulations 1988) that claimants should be given a proper opportunity of doing so. It is difficult to see how a claimant can have such an opportunity if a local office that is aware that a claimant has received a payment in consequence of personal injury does not at least draw his or her attention to the terms of paragraph 12 of Schedule 10 which are otherwise unlikely to be known to the claimant. However, in this particular case, I accept Mr. Scoon’s submission that the adjudication officer’s belief that the compensation was not a payment made in consequence of any personal injury explains why no mention of paragraph 12 of Schedule 10 was made to the claimant. The fact that the claimant had taken steps to pay off part of his mortgage before contacting the local office and had then apparently received some advice about that provision (albeit not entirely accurate advice) from a citizens advice bureau also explain why the local office may have thought it unnecessary to mention it to him.	Accordingly, I accept that my concern may not have been well founded in this case.

Date: 31 August 1995	(signed) Mr. M. Rowland
	Commissioner