R(IS) 1/03

Mr. M. Mark	CIS/78/2001
9. 11. 01
Notional capital – whether potential right to secure orders under the Matrimonial Causes Act 1973 is “capital”
Following violence by her husband, the claimant left the matrimonial home where she had resided for approximately thirty years. Fearing her husband, she brought neither divorce proceedings, nor proceedings for judicial separation, and consequently she made no applications either in respect of the property or for maintenance. She was rehoused by the local authority, having previously written to it (for the purposes of securing that rehousing) stating that she waived her right to receive any sum from her previous home. On 12 January 2000 the decision maker refused her claim for income support on the grounds that she was deemed to possess notional capital in excess of the £8000 limit. This was said to be the amount which she would have received from the matrimonial home if she had not waived her right to receive such a sum. The claimant appealed to the tribunal. In fact, subsequent to her departure from the matrimonial home, the property was sold by her husband and the proceeds applied to the purchase of another property which had then been let out. The tribunal found that the claimant had had an equitable interest in the matrimonial home by virtue of the Matrimonial Causes Act 1973 which had followed the proceeds of sale into the property bought by the husband. That equitable interest thus represented actual capital to which the claimant would have been entitled had she taken appropriate proceedings under the Matrimonial Causes Act 1973. The tribunal therefore dismissed the claimant’s appeal. The claimant appealed to a Commissioner, before whom the Secretary of State argued that the claimant had deprived herself of her interest by failing to take legal proceedings under the Matrimonial Causes Act 1973.
Held, allowing the appeal, that:
1.	the jurisdiction under the Matrimonial Causes Act 1973 to make orders for financial provision and property adjustment is a statutory one which arises on the granting of a decree of divorce, a decree of nullity of marriage or a decree of separation or at any time thereafter (paragraph 9);
2.	a property adjustment order is one that one of the parties transfers to the other one specified property, however while this can include the transfer of an equitable interest, that transfer cannot be made in derogation of the rights of third parties (paragraph 11);
3.	the claimant could not have any equitable interest in any property by virtue of the Matrimonial Causes Act 1973 unless and until a property adjustment order was made: for example if either party were to die before a decree of divorce or judicial separation were pronounced she would have nothing, similarly if a third party (such as a mortgagee) had exercised its rights so as to absorb the potential sum available (paragraph 12);
4.	the claimant’s rights under the Matrimonial Causes Act 1973 were not such as to give her any equitable interest in any particular property, rather she had a right contingent on her applying for and obtaining either a decree of divorce or judicial separation to seek maintenance payments, a lump sum payment and a property adjustment order (paragraph 13);
5.	such orders might, on the facts of this case, be expected to result in the claimant having either or both an income or a capital sum well in excess of £8000 (paragraph 13);
6.	however, this contingent right cannot properly be regarded as capital at all – it is no more a capital asset than a spouse’s legal right to be supported by the other spouse which has never been treated as capital, furthermore, the contingent right cannot be legally sold or charged (paragraph 14);
7.	as it is not a capital asset, no question of the claimant depriving herself of the asset can arise (paragraph 16);
8.	in any event the evidence in the case showed that the claimant’s reasons for not bringing proceedings were not to deprive herself of an asset to obtain income support (paragraph 17).
The Deputy Commissioner set aside the decision of the tribunal and substituted his own that the claimant’s entitlement to income support was to be calculated without regard to any potential right to any capital provision which might be made in the future under the Matrimonial Causes Act 1973 upon the granting of a divorce or judicial separation, and that the claimant had not deprived herself of any capital for the purpose of securing entitlement to income support by not bringing proceedings for a divorce or judicial separation in or prior to January 2000.

DECISION OF THE SOCIAL SECURITY COMMISSIONER

1.	This is a supported appeal, which is brought with the leave of the chairman from a decision of the Birmingham Appeal Tribunal given on 12 June 2000. For the reasons given below, this appeal is allowed. I set aside the decision of the tribunal and substitute my own decision that the claimant’s entitlement to income support is to be calculated without regard to any potential right to any capital provision which might be made in the future under the Matrimonial Causes Act 1973 upon the granting of a divorce or decree of judicial separation, and that the claimant did not deprive herself of any capital for the purpose of securing entitlement to income support by not bringing proceedings for a divorce or judicial separation in or prior to January 2000. I remit to the Secretary of State the calculation of any income support to which the claimant may be entitled as a result of this decision.

2.	As found by the tribunal, the claimant had left the house in fear after her 33 year old son had been thrown out for defending his mother in the violent arguments between her and her husband. Although there is no specific finding on the point, it would seem that this must have been shortly before she applied to be rehoused in December 1997.

3.	The claimant was refused income support from 12 January 2000 by the decision maker because she was deemed to possess notional capital in excess of the £8000 limit. This was said to be the amount which she would have received from the matrimonial home if she had not waived her right to receive such a sum. She is said to have done so by a letter dated December 1997. However, as the tribunal correctly pointed out, the letter was addressed to the local authority for the purpose of securing rehousing for the claimant, and it does not establish that she gave up any interest in the matrimonial home or the proceeds of sale from it. No question of notional capital therefore arose. I deal later in this decision with the contentions of the Secretary of State on this appeal that she may have so deprived herself by not commencing and prosecuting proceedings against her husband.

4.	The claimant believed that that house had been sold in 1998 by her husband, who appears to have moved home since she left him. He is believed by the claimant to have bought a new house with the proceeds of sale of the matrimonial home, and to have been renting out that new property.

5.	The tribunal concluded that as the matrimonial home appeared to have been sold by the husband, it was probable that it was in his name only. However it also found that as the house was sold there was actual capital which would be available to the claimant if she made a claim. She had lived there for the best part of 30 years and had an equitable interest in the home by virtue of the Matrimonial Causes Act which she could realise either in divorce proceedings or in proceedings for judicial separation. She had not brought either type of proceedings and, as the record of the proceedings shows, it had been stated on her behalf that she did not wish to bring any proceedings because of her fear of her husband, the word “any” being underlined by the chairman. This evidence was not accurately recited in paragraph 4 of the statement of material facts and reasons, where she is said to have said only that she was not willing to bring divorce proceedings.

6.	The tribunal found that while the claimant had no legal entitlement in respect of the former matrimonial home, she did have an equitable interest which then became an interest in the proceeds of sale, and her equitable interest had followed the proceeds of sale into the property to which the proceeds of sale were applied. It was an actual interest and the house, which had been rented out by her husband, represented actual capital to which the claimant would be entitled if she took proceedings under the Matrimonial Causes Act.

7.	In so finding, the tribunal appears to have accepted that there was no evidence that, apart from the provisions of the Matrimonial Causes Act 1973, the claimant had any interest in the property. I agree that there was no such evidence and the contrary is not suggested by the Secretary of State on this appeal.

8.	The tribunal concluded that the claimant’s equitable interest represented actual capital to which she would have been entitled if she took the appropriate proceedings under the Matrimonial Causes Act.

9.	The Matrimonial Causes Act 1973 contains provision for financial provision and property adjustment orders to be made in the context of divorce and judicial separation. As pointed out in Rayden and Jackson Divorce and Family Matters, 17th ed., vol.1, para.21.17, the jurisdiction is a statutory one, and the court’s powers are confined thereby. The power to make orders for financial provision and property adjustment arises on granting a decree of divorce, a decree of nullity of marriage or a decree of separation, or at any time thereafter. There is no jurisdiction, even with consent, to make such orders before decree nisi in the case of divorce.

10.	The court has a broad jurisdiction at the appropriate time, as described above, to decide whether to exercise its powers, and in what manner to exercise them having regard to all the circumstances of the case including in particular the matters specified in s.25(2) of the Act, which relates to the parties’ income, earning capacity, and other resources, to their financial needs and obligations, to the standard of living enjoyed by the family before the marriage broke down, their ages and the duration of the marriage, physical and mental disabilities of each of them, their contributions to the welfare of the family, their conduct insofar as it would be inequitable to ignore it, and in the case of divorce, the value of any benefits which they would lose the chance of acquiring.

11.	A property adjustment order is one that one of the parties transfers to the other one specified property. This could include an equitable interest in property. However it cannot do so in derogation of the rights of third parties (Rayden and Jackson, para.21.120). 

12.	It is clear that a property adjustment order can only transfer an equitable interest if the recipient does not already have that interest at the date of the order. It appears to me that the claimant cannot have any equitable interest in any property by virtue of the Matrimonial Causes Act unless and until such an order is made. If either party were to die before a divorce became final, or a decree of judicial separation was pronounced, then the claimant would have nothing. Further, she has no guarantee of any such order being made. If, for example, the husband had charged the new rented property to secure a loan, without the mortgagee being aware of the wife’s existence, and the property were then sold by the mortgagee and the proceeds used entirely to pay off the loan, then there would be nothing left in respect of which a property adjustment order could be made.

13.	In my judgment, the claimant’s rights under the Matrimonial Causes Act are not such as to give her any equitable interest in any particular property. She has a right, contingent on her applying for, and obtaining, either a judicial separation or a decree of divorce, to seek maintenance payments, a lump sum payment and a property adjustment order. Between them, these might be expected, all else being equal, to result in her having either or both of an income and a capital sum which, on the facts of this case, might well be in excess of £8000.

14.	I do not consider, however, that this contingent right can properly be regarded as capital at all. It appears to me that it is no more a capital asset than a spouse’s legal right to be supported by the other spouse, which has never been treated as capital. I do not see how it can be legally sold or charged, especially as the sale would have to contain provision for the claimant to take proceedings for judicial separation or divorce against her husband, a provision which, it seems to me, would be against public policy. Also, the court, if the transaction were otherwise lawful, would have to take the fact of the sale or charge into account in determining what order to make, bearing in mind that any order it made might not benefit the claimant at all. 

15.	If, contrary to my judgment, the right is capital, then it is to be valued under Regulation 49 of the Income Support (General) Regulations 1987 at its current market or surrender value less certain possible deductions. In the absence of any evidence of a market or surrender value for such a right, or of anybody ever having purchased such a right (the question of surrender does not seem to arise unless it can be shown that it can lawfully be surrendered in advance of a divorce or judicial separation, and that somebody would pay for such a surrender), I do not consider that any assumption can be made as to that value based solely on the value of the husband’s assets even if it were possible to form any clear view as to these.

16.	As it is not a capital asset, no question of the claimant depriving herself of the asset can arise, although this point has been raised by the Secretary of State on this appeal on the basis that by failing to take legal proceedings she has deprived herself of her interest. In any event, the case is unlike the example of the unpresented cheque in CSB/598/1987. That was not a case which arose for decision, but was merely a comment by the commissioner that if a claimant did not pay the cheque into his account regulation 4 of the Supplementary Benefit (Resources) Regulations 1981 would be likely to apply, so that he would be likely to be found to have deprived himself for the purpose of securing supplementary benefit. The case here, as set out by the adjudication officer in the submissions to the tribunal, was that the claimant had left the matrimonial home following physical and verbal abuse at the hands of her husband, that she had no contact with her husband, that because of her religion, divorce was not an option for her, and that her solicitor had contended that the claimant could not make application for her share of the matrimonial home because she would first have had to petition for divorce. That advice was wrong, in that it overlooked the possibility of judicial separation, but there is no reason to suppose that the claimant, whose first language was Punjabi and who could not read English, could be expected to know that. In the oral submissions, the claimant’s fear of her abusive husband was also given as a reason for not bringing any proceedings.

17.	All of this indicates that the claimant’s reasons for not bringing proceedings were not to deprive herself of an asset to obtain income support. This is all the more the case if, as is suggested, the value of the asset she might have obtained was far more than the income support she was seeking. I have no hesitation in finding as a fact that the claimant was not acting as she did for the purpose of securing entitlement to income support or increasing the amount of that benefit.

18.	It appears to me that the appropriate course for the Secretary of State, given that the claimant and her husband are still married, may be to take proceedings against the husband under s.106 of the Social Security Administration Act 1992.   That, however, is a matter for the secretary of state. For the reasons given, the appeal is allowed and I reach the decision set out in paragraph 1.

Date: 9 November 2001					(signed) Michael Mark
								 Deputy Commissioner