Jones v Secretary of State for Work and Pensions

In deprivation-of-capital cases, whether a claimant acquired a personal possession or parted with capital for the purpose of securing income support is a question of fact. An immediately repayable debt is strong evidence against that purpose, but it is not legally conclusive; the circumstances must be assessed as a whole. If the transaction is repayment of a debt and the asset belongs to the creditor, the claimant has not deprived herself of capital by acquiring it. The creditor’s lack of pressure after the transaction and the claimant’s use of the asset do not answer the relevant question. On an alternative ownership analysis, a security charge is ordinarily deducted under regulation 49(a)(ii) of the Income Support (General) Regulations 1987; on the facts, the charge was not created to secure benefit entitlement.

Mrs Verna Jones had received £57,000 from the sale of land, exceeding the capital limit for income support. Part of the proceeds was used in a transaction concerning a £17,000 debt to Mr Mike Smith and a BMW. The appeal tribunal held that she had deprived herself of capital for the purpose of retaining benefit entitlement. Mr Commissioner Jacobs dismissed her further appeal on 17 July 2002. The Court of Appeal considered whether the transaction was repayment of the debt with Smith becoming owner, or acquisition by Jones subject to security, and whether the evidence supported a finding of the prohibited purpose.

Disposition. The appeal was allowed unanimously. The Tribunal’s reasoning and the Commissioner’s decision could not stand. The final order entitled Mrs Jones to income support for 13 October to 30 November 1999 and from 1 December 1999 onwards. The application for permission to appeal was also allowed, with costs.

1. Repayment analysis. Schiemann LJ considered that the Tribunal had accepted the existence of a genuine, repayable loan and had treated the car as belonging to Mr Smith. On that analysis, the purchase repaid the debt and the car was Mr Smith’s capital. Once that analysis had been adopted, the Tribunal could not conclude that Mrs Jones had deprived herself of capital for the Prohibited Purpose. Whether Mr Smith pressed for repayment after the purchase, or whether the car was an expensive luxury item for the Jones household, was irrelevant.
2. Alternative security analysis. If the Joneses owned the car subject to a charge securing Mr Smith’s debt, regulation 49(a)(ii) of the Income Support (General) Regulations 1987 ordinarily required the encumbrance to be deducted from the car’s current market or surrender value. Schiemann LJ expressed no view on the Commissioner’s suggested interaction between that provision and regulation 51. Even on that approach, however, it would be perverse on these facts to find that the charge had been created to secure income support. It was the means by which Mr Smith agreed to the arrangement and allowed Mr Jones to use the car.
3. Purpose is factual. Dyson LJ held that the purpose of acquiring a personal possession or parting with capital under paragraph 10 of Schedule 10 and regulation 51(1) was a question of fact in every case. An immediately repayable debt was highly cogent evidence against the prohibited purpose, but was not conclusive as a matter of law. Repayment of a debt that was not immediately repayable did not necessarily establish that purpose either. The court rejected the absolute formulation in R(SB) 12/91, paragraph 13, but agreed with the guidance in paragraphs 14 and 15 that the issue depended on the facts.
4. Application. The correspondence showed that Mr Smith was pressing for immediate or early repayment. There was no evidence capable of justifying the Tribunal’s finding that the transaction was entered into for the prohibited purpose. The Tribunal had been distracted by the unusual nature of the arrangement and Mr Jones’s permitted use of the car.

1. Court of Appeal (Civil Division): On 10 July 2003, allowed the appeal from the Social Security Commissioner’s decision and ordered that the appellant was entitled to benefit for the relevant periods. The decision is reported at [2003] EWCA Civ 964.
2. Social Security Commissioner: Mr Commissioner Jacobs dismissed the appeal on 17 July 2002.
3. Appeal tribunal: The Tribunal dismissed Mrs Jones’s appeal on 26 June 2001.