R(IS) 3/03
Mr. C. Turnbull CIS/2698/2002
25.9.02
Capital – disregard of trust fund derived from compensation for personal injury – whether disregard applies when injury was to deceased partner
The claimant received compensation in 2001 in respect of respiratory disease suffered by her husband, who died in 1988. She transferred the capital to a trust fund. The Secretary of State decided that the trust assets could not be disregarded under paragraph 12 of Schedule 10 to the Income Support (General) Regulations 1987, because they were not derived from a payment made in consequence of personal injury to the claimant. The tribunal confirmed the Secretary of State's decision.
Held, dismissing the appeal, that:
- even if the effect of regulation 23(1) of the 1987 Regulations was that the reference to "claimant" in paragraph 12 of Schedule 10 should be read as including a reference to the claimant's partner (which the Commissioner doubted), he had ceased to be her partner on his death (paragraphs 7-11);
- the argument based on the contention that the husband's personal injury claim had become that of the claimant on his death was fallacious, because the issue under paragraph 12 of Schedule 10 was not who was beneficially entitled to the cause of action, but who suffered the personal injury (paragraph 12);
- the fact that the notional capital provisions in regulation 51(1) and (2) contained exceptions for a trust fund derived from compensation for personal injury, but without specifying that the injury should be to the claimant, could not result in paragraph 12 of Schedule 10, which was concerned with a different question, having a meaning other than that which it plainly had (paragraphs 13-15);
- there was no doubt that the value of a beneficial interest under a bare trust fell to be taken into account as actual capital under regulation 46(1) of the 1987 Regulations, so that there was no need for the Secretary of State to rely upon regulation 51(1) and (2), and the exceptions to those provisions therefore did not come into play (paragraph 16).
DECISION OF THE SOCIAL SECURITY COMMISSIONER
- I dismiss this appeal, brought with the leave of a legally qualified panel member, against a decision of the Barnsley Appeal Tribunal made on 14 May 2002.
- The short issue in the appeal is whether the provision in para. 12 of Schedule 10 to the Income Support (General) Regulations 1987 that, in calculating the claimant's capital for income support purposes, trust assets derived from a payment made in consequence of any personal injury to the claimant are to be disregarded, applies in the circumstances of the present case.
- By a decision made on 6 February 2002 the Secretary of State decided entitlement to income support on the footing that the trust fund was not to be so disregarded, and the Tribunal upheld that decision. In my judgment they were right.
- The relevant facts (as to which there has never been any dispute) are as follows. The Claimant's husband, who worked as a miner, died in 1988. An action was brought by his executor against his former employer, British Coal, for negligence in respect of respiratory disease suffered by him. This litigation has been referred to by the Claimant's solicitors as the British Coal Respiratory Disease Litigation, and I therefore infer that it was in the nature of a group claim. Shortly before 6 March 2001 there were paid to the Claimant, as a result of this litigation, the sums of £3871.86 (described by the Claimant's solicitors as an interim payment) and £7734.51 (described by the solicitors as a bereavement award). I infer that the claim included one under the Fatal Accidents Act 1976 and that the latter payment was one made for the benefit of the Claimant by way of damages for bereavement under s.1A of that Act. I do not know whether the former payment was in respect of loss suffered by the claimant's husband himself, or in respect of loss to the Claimant as his dependant. It does not make a difference to my decision. On 6 March 2001 the Claimant transferred to herself and her daughter, as trustees, the sum of £9,106.37 (being the above 2 sums after deduction, I assume, of certain expenses) on the terms of a Trust Deed of that date whereby the sum was declared to be held on a bare trust for the Claimant.
- Para. 12 of Schedule 10 provides that in calculating the amount of a claimant's capital there shall not be taken into account:
"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."
- It has been assumed throughout by both parties that the reference to "trust" in para. 12 of Schedule 10 includes a bare trust, and I proceed on that footing. The simple ground on which the Secretary of State and the Tribunal held that in calculating the Claimant's capital for income support purposes the trust fund could not be disregarded under that provision was that the personal injury in consequence of which the compensation was paid was not to the Claimant, but to her former husband. The argument on behalf of the Claimant, however, is that "the entitlement of widows to means tested benefits can be preserved even when they receive a payment of compensation for personal injury to their late husbands."
- The first ground put forward in support of that contention is that Reg. 23 of the 1987 Regulations includes a provision that:
" ... any reference to the "claimant" shall, except where the context otherwise requires, be construed, for the purposes of this Part, as if it were a reference to his partner … "
(Reg. 23 is in Part V of the Regulations, as is Reg. 46, the regulation which gives
effect to the disregards in Schedule 10). So, it is argued, the reference to "claimant" in para. 12 of Schedule 10 must be read as including a reference to the claimant's partner, and therefore in this case a reference to the Claimant's former husband.
- In my judgment that argument is wrong. I assume for the moment that the Claimant is correct in asserting that the reference to "the claimant" in para. 12 of Schedule 10 should, for present purposes, be read as including a reference to her partner. By Reg. 2(1) of the 1987 Regulations "partner" is defined as meaning, in the case of a married couple, the other member of that couple. By s.137(1) of the 1992 Act "married couple" means "a man and woman who are married to each other and are members of the same household." The Claimant's husband clearly ceased to be her "partner" when he died. The Claimant's argument would have to be that in para. 12 of Schedule 10 the words "in consequence of any personal injury to the claimant" must be read as meaning "in consequence of any personal injury to the claimant or the claimant's partner or former partner". Reg. 23(1) provides no support for such a construction. This is the ground on which the Tribunal dismissed the appeal.
- It seems to me that there may well be an additional reason why the Claimant's argument in para. 7 above is wrong, although I do not base my decision on this reason because it was not advanced by the Secretary of State and therefore has not been considered in the written submissions before me. This is that it may, in any event, not be right to treat the reference to "the claimant" in para. 12 of Schedule 10 as including, for present purposes, a reference to the claimant's partner. It is necessary to have regard to the whole of Reg. 23 and to its purpose. By s.134(2) of the Social Security Contributions and Benefits Act 1992 the entitlement of one member of a family to any one income-related benefit excludes entitlement to that benefit for any other member for the same period. So, only one member of a married couple living together can claim income support, but the claimant in effect claims on behalf of both because the applicable amount for a couple is greater than that for a single person. Further, by s.136(1) of the 1992 Act:
"Where a person claiming an income-related benefit is a member of a family, the income and capital of any member of that family shall, except in prescribed circumstances, be treated as the income and capital of that person."
- I now set out the whole of Reg. 23(1):
"Subject to paragraphs (2) and (4) and to regulation 44 (modifications in respect of children and young persons), the income and capital of a claimant's partner and the income of a child or young person which by virtue of [s.136(1) of the 1992 Act] is to be treated as the income and capital of the claimant, shall be calculated in accordance with the following provisions of this Part in like manner as for the claimant; and any reference to the "claimant" shall, except where the context otherwise requires, be construed, for the purposes of this Part, as if it were a reference to his partner or that child or young person."
- It appears that the purpose of the concluding part of Reg. 23(1) is simply that, for the purpose of calculating the partner's capital where it is to be treated as that of the claimant under s.136, references in the detailed provisions of Part V to "the claimant" are to be treated as references to the claimant's partner. It should be noted that Reg. 23 says that references to the claimant are to be treated as references to the partner (i.e. "the claimant's partner" is substituted for "claimant" so that the detailed provisions of Part V make sense when applied to calculation of the claimant's partner's capital). It does not say that references to "claimant" shall be treated as including references to the claimant's partner. In the present case we are not concerned with determining the amount of the Claimant's husband's capital which is to be treated as that of the Claimant, but with determining the amount of the Claimant's own capital, and Reg. 23(1) therefore arguably simply has no application.
- The second argument on behalf of the Claimant is put as follows:
"The Claimant's husband has never had the benefit of a payment in consequence of a personal injury. He died in 1988, having only a potential entitlement to compensation, which was not realised until the Coalfields litigation was successful some ten years later. His widow became entitled in his stead as a beneficiary of his estate and her entitlement did not crystallise until she was paid out last year. She stands in the place of her husband for the purposes of the potential claim which passed upon his death to the benefit of her estate. She has continued his potential claim and it has become hers. It is her personal injury claim."
I am not sure that that is a correct analysis of the nature of the claim, to the extent that it was one under the Fatal Accidents Act 1976. But even to the extent that it is a correct analysis of the nature of the claim, the argument based on it is fallacious. Para. 12 of Schedule 10 looks not at who was beneficially entitled to the cause of action, but at who suffered the personal injury.
- The third argument put forward by the Claimant's solicitors is based on the following parts of Reg. 51 of the 1987 Regulations:
"(1) 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 …
…
(2) Except in the case of–
…
(b) a trust derived from a payment made in consequence of a personal injury …
… any capital which would become available to the claimant upon application being made but which has not been acquired by him shall be treated as possessed by him …"
- The argument based on those provisions is as follows:
"… if the interpretation of para. 12 of Schedule 10 is restricted as contended for by the Benefits Agency, then provisions as to notional capital would make no sense. The provisions as to notional capital in Reg. 51 clearly contemplate that persons other than the victim of the personal injury will benefit from a trust of monies received in consequence of a personal injury. If the Benefits Agency's argument is correct, such monies could never benefit anybody other than the claimant and it would not be clear why the phrase "in consequence of any personal injury" in Regulation 51(1) is used."
- However, I do not see how the provisions of Reg. 51, which are of course concerned with when a claimant should be treated as possessing capital which he does not in fact possess, can be used to override the clear wording of para. 12 of Schedule 10, which is in effect concerned with what capital the Claimant should be treated as not possessing. It may well be that the main purpose of Reg. 51(1) was to complement para. 12 of Schedule 10 by ensuring that a claimant who takes advantage of the latter provision by declaring a trust for his own benefit of compensation for personal injury to himself, thereby preventing that compensation from being part of his actual capital, does not get caught by an argument that he has thereby deprived himself of that capital, so that it becomes part of his notional capital under Reg. 51. It may also be (I do not need to decide this) that Reg. 51(1) goes further and applies even if the capital of which the claimant has declared a trust was derived from a payment for injury to someone else. Its wording would certainly appear to be wide enough to cover that situation. But it is concerned with a different question, and cannot in my judgment result in para. 12 of Schedule 10 having a meaning other than that which it plainly has. Further, the Claimant's argument proves too much, because if it is correct that Reg. 51 can apply no matter who suffered the personal injury from which the capital is derived, the consequence of the Claimant's argument would not be that the reference to "payment made in consequence of personal injury to the claimant" in para. 12 of Schedule 10 should be read as including an injury to the claimant's partner. It would be that it must be read as if the words "to the claimant" were not present at all. I do not see how Reg. 51 could have that effect.
- The final argument on behalf of the Claimant is that this is a situation where Reg. 51(1) and (2) apply directly, so that under the exceptions to those provisions the Claimant should not be treated as possessing the trust capital. However, in this case there is no need for the Secretary of State to seek to rely on the primary provisions in Reg. 51(1) or (2) to argue that the Claimant should be treated as possessing capital which would not under general principles be taken into account as part of her capital. The exceptions to those provisions therefore do not come into play. Under Reg. 46(1) of the 1987 Regulations "the capital of a claimant to be taken into account shall … be the whole of his capital calculated in accordance with this Part ...". There is no doubt that the value of a beneficial interest under a bare trust falls to be taken into account. Reg. 51 is therefore irrelevant.
| (Date) 25 September 2002 |
(signed) Charles Turnbull
Commissioner |
