Notional capital (or possibly actual)

Client is appealing HB/CTB. The council’s submission cites the law relevant to the appeal as being reg 49 (notional capital) and reg 50 (diminishing notional capital), and the client is “deemed as having” excess capital. [I think that’s a wrong ref, as client is of pension age]. They submit that the client could be repaid by her creditors but has made no effort to claim against them. They have also separately stated in writing that the client is “deemed to have deprived herself of capital, and whilst there is no suggestion that she did this intentionally to become entitled to benefit, the net result remains that she does not qualify”.

Either myself or the council are fundamentally misunderstanding the rules on deprivation. Doesn’t the council’s statement above totally undermine their own case?

I am concerned that I’m missing something obvious here, as previous to the current appeal the client lost on essentially the same facts at tribunal a few years ago (unrepresented). The background is: client lost almost all her money making what turned out to be an unwise and unsecured loan a few years, no capital has been repaid and it’s now increasingly unlikely to be. Was turned down for HB due to excess capital, client recalls that the tribunal judge seemed to accept there had been no intention to secure benefit, but still decided there was excess capital. Even after obtaining the bundle, we’re still a bit unclear on whether the previous tribunal decision was that client had actual or had notional capital. Both arguments were referred to in the previous bundle, it seems no statement of reasons was requested. Client was also turned down for PC due to too much tariff income, that decision not taken to tribunal.

It seems to me that in the current case, there might also be arguments on whether the client has actual capital (eg by way of a beneficial interest in a business), or possibly a future interest or money available on application (which I understand shouldn’t count), or I suppose she has a cause of action which could have a value. But, those aren’t the arguments the council are making, as yet.

How long ago was the loan made? Has it been acknowledged or anything paid in the last 6 years? If not it may be statute-barred which would mean that the client could not now take court action to recover it.
Why has no action ever been taken to recover - was it by chance to a family member?

If it is not statute barred, how likely is it that the debtor would be able to pay it if sued? Do they have money/assets which could be used to repay it? Even if the client gets judgment against the creditor, they may still be unable to enforce it, so it might have to be considered a bad debt. In that case its only value is likely to be what someone would pay to buy the cause of action on a speculative basis.

It may be that the failure to take steps to recover the money is a factor in the decision - but that would indeed be notional rather than actual capital.

The debt is not time-barred, and is recently acknowledged. The agreement was that interest payments should be made - which they were (sorry I didn’t make that clear above); and the capital could be called in when required - which it now has been, though with no immediate prospect of it actually being paid. There are indeed personal reasons why county court action might not be taken, but also perhaps reasonable financial ones too. [*] The defaulted agreement is quite clear on paper, so that there might be a saleable debt here. Maybe we’ll have to try to find out what a debt collector would pay for a notice of assignment. I guess the answer might be “nothing without a judgement”, but I’m hardly qualified to say.

It may be that the failure to take steps to recover the money is a factor in the decision - but that would indeed be notional rather than actual capital.

Shelter’s Guide to HB claims that whether a claimant seeks to recover the money they have deprived themselves of “appears to be irrelevant”, citing CH/3670/2008 in which a trustee in bankruptcy didn’t bother to reverse a bankrupt’s payments in preference. Can failure to vigorously pursue recovery really form part a deprivation decision?

*edit to add: Actually, I (and my client) don’t really know if there is equity floating around or not. It might be that my client could go after a charging order or a statutory demand with a chance of success. But should that make a difference?

Thanks for the reply. I’m now a bit surer that I’m not missing anything obvious in the rules.

Regarding business assets or whatever, I’d much rather deal with any issues sooner rather than later. But you’re right that I shouldn’t be needlessly raising speculative points against my client.

As regards the previous tribunal decision, I had assumed there was no scope at this stage for getting a decision well over 13 months old to be set aside or revised, but I will look into that, if the current appeal goes our way.

edit - I have missed something obvious - the client’s age back at the date of disposal of capital. Oh well.