UC and capital dispute

I have a client who was claiming UC but had a large amount of capital deposited into his bank a/c from the Teachers Pensions as a result of an entitlement from his deceased father.  Immediately the client saw it he knew that the calculated amount was incorrect and as a result of it taking him over the £16k capital limit advised the DWP through his UC journal that the capital existed and that he was disputing it and his UC claim was immediately stopped on 28/10.
It took him until end of Jan to get the Teachers Pensions agency to admit it was an error and he was requested to send all of the money back.  He asked the DWP to review the decision to stop his UC due to exceeding capital and they said they would not change the decision due to the incorrect evidence not being supplied despite him showing that the money has been sent back, the only thing he didn’t have was evidence that it has been received by the Teachers Pension agency.  The client has had to start a new UC claim as the DWP will not accept a backdating request made by him either.  Does anyone have any experience of appealing a UC decision that has been made due to a disputed amount of capital??

Apologies but you have stumbled into a trust law issue.

On the facts of your case, given that your client appears to have identified immediately that the money was paid to him by mistake, it would seem likely that he held it on a ‘constructive trust’ in favour of the pension fund. This is essentially a legal device which steps in to imply a legal duty on the person who holds the money to deal with it for the benefit of someone else. In this case, the trust would arise because he had received the money by mistake, he was aware of that fact and it would be unconscionable for him to be allowed to deal with those funds as though they were his own.

Assessment of capital looks at beneficial rather than legal interests - i.e. we are looking at who is supposed to benefit from the money, rather than whose account it is sitting in - and therefore in a situation where the claimant holds money on trust for someone else, the capital will not be taken into account

Pulling those two threads together, if the money was indeed held on constructive trust for the benefit of the pension fund, it was never your client’s capital in a sense that the DWP ought to care about and his UC ought never to have stopped.

Looked at in this sense, the request for evidence that the money had been paid back was a red herring. It did not matter whether or not he had paid it back yet because it was not to be taken account of to begin with.

This analysis works largely because it seems to have been very obvious to your client from the get-go that the money had been paid in error. The same argument may not work in a case where the dispute is less clear-cut.

Just trying to understand where DWP are coming from here, if they’re saying that the money counts as capital until the point that the pension agency changed their position on wanting the money back, i.e. between Oct and Jan. I may well be wrong, but perhaps they are looking at the ADM at H1339:

People have a beneficial interest in capital that has been given to them even if it has to be repaid. However, people no longer have a beneficial interest in capital they have been given if they are under a certain and immediate liability to repay it. People are no longer the beneficial owners of the capital from the date the certain and immediate liability arises.

As Elliot says, surely the main point against that being followed is that it was never his money in the first place. He wasn’t “given” the money, in the sense of a gift, he received it in error. The case the ADM cites in support of their guidance is R(IS)5/99, which concerns a student who abandoned their course, and from what point his overpaid student finance should lose the character of income for a future period. Not at all the same situation as “bank error in your favour” (and perhaps not even squarely backing up that guidance in the ADM).

Thanks so much for these replies, really useful and helpful information