KC v The Secretary of State for Work and Pensions

KC claimed, and, from 11 December 2021 was awarded, universal credit (“UC”). She had declared capital of between £6,000 and £16,000. On 23 June 2023, KC notified the Department for Work and Pensions (“DWP”), acting on behalf of the Secretary of State for Work and Pensions, that she had received a payment taking her over the limit of £16,000 of capital to be entitled to UC.

KC advised DWP that she had received £25,0000 on 24 June 2023 and £20,500 on 25 June 2023, from the proceeds of sale of her former family home (sold on 14 June 2023). When added to KC’s existing capital, she had a total of £49,284.85.

On 26 July 2023, DWP decided to terminate KC’s UC award on the basis that she had capital over £16,000 and therefore did not meet the condition of entitlement in section 5(1)(a) of the Welfare Reform Act 2012.

On 04 August 2023, KC made a further UC claim. She declared savings of £13,978. On 15 August 2023, a DWP decision-maker decided that KC had a total capital of £47,398.23, £34,115.50 of which was notional capital that KC had deprived herself of in order to obtain UC. DWP therefore decided KC was not entitled to UC from the date of her new claim on 04 August 2023. DWP upheld this decision at mandatory reconsideration stage (on 03 October 2023).

KC appealed DWP’s decision to the First-tier Tribunal on 19 October 2023. On 16 May 2024, a First-tier Tribunal (“FTT”) decided KC’s appeal after an oral hearing, at which DWP was also represented by a Presenting Officer. The FTT refused KC’s appeal and confirmed DWP’s decision.

On 10 January 2025, KC applied to the Upper Tribunal for permission to appeal against the FTT’s decision. In a decision dated 23 February 2025, I granted KC permission to appeal against the FTT’s decision on the basis it was arguable the FTT had made one or more errors of law in relation to the following matters.

R. Hussain is the Secretary of State’s representative in these proceedings, and I refer to them in this Decision as “the SSWP’s Representative”. They support the appeal to the Upper Tribunal in a very helpful written submission dated 16 April 2025. The SSWP’s Representative invites the Upper Tribunal to set aside the FTT’s decision dated 16 May 2024 for containing material errors of law, for the reasons set out below.

Adequacy of factual findings to support decision / misdirection in law: the SSWP’s Representative submits the FTT failed to consider whether a Quistclose trust had been established in KC’s circumstances. They argue this type of trust arises when funds are given for a specific purpose and the recipient does not gain a beneficial interest in the money. The SSWP’s Representative argues that in these circumstances, the transferor retains the beneficial interest unless and until the conditions for which the funds were provided are fulfilled. Should this not happen, the money remains the property of the transferor, retaining the right to reclaim it.

The SSWP’s Representative submits the arrangement between KC and her ex-partner does constitute a Quistclose trust.

The SSWP’s Representative submits that the FTT placed undue weight on the absence of documentary evidence about some matters (for example, the fact there was no written agreement requiring KC to use the money for her children). The FTT discredited KC’s account by focusing on the lack of evidence from a third party who transferred the funds and the lack of a written agreement. The SSWP’s representative submits that in doing so, the FTT failed to consider the legal trust implications. They submit that the FTT’s approach failed to engage with the legal possibility that KC held the money on trust (as envisaged in Quistclose) and that her ex-partner never intended for her to personally benefit from the funds.

The SSWP’s representative submits that the FTT concluded at paragraph 20 of the Statement of Reasons that KC lacked credibility because of the lack of an agreement requiring her to use the money for the children and because of her ex-partner’s allegedly controlling nature. The SSWP’s representative submits that this reasoning improperly discounted the possibility of a purpose trust, where the transferor retains a beneficial interest unless and until the purpose is fulfilled.

The SSWP’s Representative also submits that the FTT also failed to adequately take into account the evidence at Addition E (pages 1-3) of the bundle, which showed KC transferred the money into the children’s saver account in her mother’s name. The SSWP’s Representative submits this indicated KC complied with the verbal agreement with her ex-partner that he would transfer half the proceeds from the sale of the family home on condition she split it with their children. The SSWP’s representative also submits that the evidence indicated KC had made no attempt to use the money for herself, suggesting she had no proprietary interest in the funds. The SSWP’s Representative submit that KC’s transfer of the monies to her mother suggests she was not the beneficiary of the funds.

The SSWP’s Representative submits that on the balance of probability, KC has been consistent and truthful in her account. KC transferred the money to the children’s saver account after receiving the funds and her bank statements show she did not spend any of it. Furthermore, the non-molestation order prevented KC contacting her ex-partner, limiting her ability to obtain additional evidence.

The SSWP’s representative submits the FTT failed to take adequate account of this difficulty, when evaluating KC’s credibility and the evidential burden. The SSWP’s representative submits the Quistclose principle does not require formalities but rather a clearly defined purpose at the point of transfer, which is present in KC’s case.

The SSWP’s representative therefore submits that the FTT failed to make adequate factual findings about whether KC ever acquired both the legal and beneficial interest in the capital. They also submit the FTT did not consider the difficulty KC might face in obtaining such evidence given the circumstances.

The SSWP’s representative submits the FTT has made an error of law in its decision dated 16 May 2024 by placing excessive weight on the lack of documentary evidence, and in failing to consider whether the money in question was beneficially owned by KC or by others instead.

As a result, the SSWP’s representative submits the remaining appeal grounds put forward for KC are immaterial. The SSWP’s representative argues that as the money remained the beneficial property of KC’s ex-partner until it was transferred to the children (at which point it became the children’s beneficial property), there was no point at which those monies needed to be considered as part of KC’s capital. The SSWP’s representative submits that as a result, there is no consideration of deprivation under regulation 50, nor notional capital, under the 2013 Regulations, to consider here.

Given the Secretary of State’s support for the appeal to the Upper Tribunal, KC’s representatives have, understandably, chosen not to make further substantive representations in their reply dated 03 June 2025.

Neither party requested an oral hearing of the appeal. I took these preferences into account. I considered the appeal file. I decided the interests of justice did not require an oral hearing. The parties agree the FTT made a material error of law. It was proportionate to determine the appeal on the papers.

There has been a delay in me being able to make this decision, for which I apologise to the parties.

At the permission stage, I only needed to be persuaded that it was arguable with a realistic (as opposed to fanciful) prospect of success that the FTT had made an error of law in a way that was material.

At this substantive stage, I need to be satisfied on the balance of probabilities that the FTT did make an error or errors of law that were material.

I am satisfied, on the balance of probabilities, that the FTT made material errors of law in relation to the appeal grounds addressed by the SSWP’s representative at paragraphs 8 to 16 above, dealt with in more detail by their submission dated 16 April 2025.

Having decided the FTT’s decision involved material errors of law, it is appropriate to exercise my discretion to set aside the Tribunal’s decision dated 27 February 2024 under section 12(2)(a) of the Tribunals, Courts and Enforcement Act 2007. Having done so, section 12(2)(b) of that Act provides that I must either remit the case to the First-tier Tribunal with directions for their reconsideration or remake the decision.

Neither party invited me to remake the FTT’s decision. I gave careful consideration to whether I should remake the decision myself. I did so because of the terms of the submissions by the SSWP about whether KC has demonstrated a Quistclose trust was established. If remaking the decision were appropriate, it would avoid further delay in the appeal having to be decided by a new FTT. I also considered whether it would further the overriding objective by avoiding the potential impact on KC of having to give evidence about the circumstances in which the money was distributed (including the difficulties experienced with her ex-partner).

On balance, I have decided that it is more appropriate for this appeal to be remitted for a new First-tier Tribunal to decide. I note that neither party has suggested it is appropriate for me to remake the decision. It will be necessary for facts to be found. The First-tier Tribunal is best placed to carry out that process.

It appears that the consideration of whether KC received the moneys through a Quistclose trust, may also be relevant to the Secretary of State’s decision dated 26 July 2023 to terminate her previous universal credit award. That decision was made on the basis that the sums KC received from the sale of the former family home took her over the capital limit. Those sums appear the same ones that were taken into account in the decision dated 15 August 2023. The only appeal before me is, however, the one against the FTT’s decision about the Secretary of State’s decision dated 15 August 2023. This uncertainty creates another reason for me not to dispose of KC’s appeal by deciding it myself.

I have made directions for the Secretary of State to provide a submission about this appeal for the benefit of the First-tier Tribunal. See paragraph E of the Directions at the start of this Decision Notice. This gives the Secretary of State the opportunity to consider and to confirm to the First-tier Tribunal whether he continues to maintain the position taken in the decision dated 15 August 2023. It also invites the Secretary of State to consider the relevance, if any, of these matters to the earlier decision dated 26 July 2023 terminating KC’s previous universal credit award.

I therefore remit KC’s appeal for rehearing before a new First-tier Tribunal. It will make a fresh decision about the amount of any capital KC held (including notional capital) at the date of her UC claim on 04 August 2023.

Although I have set aside the FTT’s decision dated 16 May 2024, I am not making any findings, or expressing any view, about the amount of any capital KC held at the date of her universal credit claim on 04 August 2023. The next tribunal will need to hear evidence, make its own findings of fact, and provide its reasoning for the decision it reaches.