We have recently taken a case to Tribunal arguing that a proportion of undeclared capital should be considered as belonging to the son who my client has appointeeship for. All of the families income (including that of the son) was paid into one account. The arguement was made in accordance with Reg 52 of the Income Support (General) Regs 1987. The appeal was unsuccessful.

Having recieved the statement of reasons the Chairman has given his primary reason for disallowing the appeal as being; the account was used to pay for daily living expences such as shopping, Sky TV and catalogue payments. (All of which, the son would have benefit in some way from.) But that the parents have not treated the money as though it were in trust. (This wasn't actually our arguement.)

The family also paid into a savings account to pay off the mortgage interest and endowment. Again, in my mind the son has a beneficial interest in this. It may also be helpful to know that the son is in his 30's so it would not be unreasonable for him to be contributing towards the running of the household.

I am trying to gather pieces of case law which would be able to support my arguement that the family were entitled, where reasonable, to spend money on house hold items that the son would have otherwise been expected to contribute to.

Any thoughts?

Kayley Rutland

Did you propose a definite figure for the son's capital? Did the chairman disagree with your calculation?

Hi Gareth,

Yes a figure was proposed in accordance with reg 52. Our reading of this regulation was that an equal portion of the money in the account should be classed as the sons e.g. 1 third (mother, father and sons income all in one account.)

The chairman did not take this into account, stating that in his opinion none of the capital should be held as belonging to the son.

Whose names was the account in?

I'd read "beneficially entitled in possession to any capital asset" in reg 52, not as referring to the bank account but to the amount of money each person owned in that single account. That would mean producing a calculation of each persons share of the total pot. If you could establish that all of them had a beneficial interest in the total pot, then that would probably get you a better result but I'm not sure that you can do that.

How did the proportions of income contributed by each person match up - what were the relative figures?

I'm presuming it's the mortgage savings account you are talking about as the undeclared capital. Unless the son is a party to the mortgage he is not under any obligation to pay it off, though his parents are. If he is giving them part of his income to help with this it may be most logically construed as a gift.
I'm also presuming that it is the parents' appeal you are talking about. Is thus son able to explain or understand what is being done with his money, or approve it? I would feel worried that without his express consent his appointee is acting in breach of a fiduciary duty to use the money for him. Putting it aside to pay off the mortgage at some future date may be too remotely connected with him personally.
I think this is why the chair was talking about trusts: if you hold someone else's money for them that is a trust, whatever name you give it. Appointees are in very much the same position as trustees and will therefore be under a duty not to take advantage of their position for their own benefit.

The phrase “beneficially entitled in possession” means, among other things, the right to dispose of an asset, or a share of an asset. Unlike property where the beneficial interest will be settled at the time of conveyance and may or may not coincide with a person’s legal interest, bank accounts pose a different problem.

With bank accounts, whose name they are in can be important. If a person has a joint account with, say, 2 others, then each may be deemed to have a one third share. If a person puts less than one third in and there is clear evidence that the money was never intended to be part of the general fund and was earmarked for a specific purpose then it may be determined that a person is only entitled to that percentage share which may be more or less than one third.

If a person has money (whether wages or benefits) paid into a bank account in another’s name then (as Ariadne says) the account holder holds the money on trust for that person. The problem is (if there is no clear record identifying those amounts or there are no records of separate withdrawals and/or separate receipts for expenditure in respect of that person only) then the trust may fail for lack of certainty. A trust lawyer might correct me on that.

That is the problem when funds are co-mingled in this way and amounts are drawn out for generalized household expenditure for the family as a whole. How is an adjudicating authority supposed to identify how much to apportion to each person when it cannot be determined with any degree of accuracy whether, say, a person’s DLA paid the gas bill this week or the other person’s income did.

As for the mortgage, again as Ariadne said, his interest would have had to be determined when the mortgage was taken out. Any voluntary contributions afterward would not create a beneficial interest but would probably constitute a gift or a loan. His weekly contributions would merely be seen as him paying his ‘keep’. Otherwise you would have a situation where when children living in the family home left school and started earning they could claim that part of their keep created a beneficial interest in the family home. I can’t see the courts ever going for that.

There is a process called "tracing" which is used to determine who any money in a mixed bank account belongs to. If the mixture is between a trustee and a beneficiary then ther is a presumption that the trustee is hones before he is dishonest, so he spends his own money in priority to the beneficiary's, unless he makes it clea that he is spending money very specifically on the beneficiary's behalf. You need to be able to work out the source of the payments into the account and you can then work out whose money is going out. It's a nightmare but a great favourit for a question in an equity exam.

Oh, and if you actually buy something with the beneficiary's money it belongs to him....