Universal Credit Claims and Personal Injury Compensation

6 Nov 2019 | William Ford

Table of Contents

The general rule on entitlement to Universal Credit is that a person is not entitled if they have capital of over £16,000.

However, there are various scenarios in which capital can be disregarded. One such scenario is where the claimant has capital that has been paid to them in consequence of a personal injury. Regulation 75(1) and (4) of the Universal Credit Regulations 2013 provide as follows:

75.—(1) This regulation applies where a sum has been awarded to a person or has been agreed by or on behalf of a person, in consequence of a personal injury to that person.

(4) If the sum is held in trust, any capital of the trust derived from that sum is to be disregarded in the calculation of the person’s capital and any income from the trust is to be disregarded in the calculation of the person’s unearned income.

The principle behind this is clear. A person who has suffered a personal injury should lose their entitlement to benefits simply because they have received compensation for that personal injury. However, the legislation leaves open the question of what counts as a sum awarded in consequence of a personal injury.

There are various companies that specialise in setting up trusts for people who have been awarded compensation, with a view to protecting those monies from being counted as capital for the purposes of entitlement to welfare benefits.

However, in my experience, these companies are often instructed to set up trusts in circumstances that are unclear as to whether the compensation has been paid in consequence of a personal injury. A good example of this is claims against the Home Office for false imprisonment. Where immigrants have been unlawfully detained, purportedly under immigration rules, they are entitled to bring a claim for false imprisonment. Such claims are often settled out of court, and will often involve claims for psychiatric injury, aggravated damages, and exemplary damages in addition to damages for false imprisonment. It can be very difficult to ascertain from a global settlement how the damages are to be divided. Further, can all of these heads of damages be considered capable of being awarded in consequence of a personal injury?

These were the issues that came before the First-Tier Tribunal (Social Entitlement Chamber) in the recent case of Somasuntharam v Secretary of State for Work and Pensions (Ref: SC154/18/03105).

Background

The Appellant had been unlawfully detained by the Home Office whilst he was an asylum seeker. He suffered significant psychiatric injury as a result. On 29 October 2015 he was awarded £40,000 by the Home Office in an out of Court settlement by way of compensation. This sum comprised damages for false imprisonment, psychiatric injury, and aggravated damages.

After deductions for legal costs and other expenses at the time the Appellant placed the damages in a personal injury trust in December 2016 (having been advised to do so) the total sum was £26,526. This sum was not in dispute in the appeal. The Appellant and a distant cousin were the trustees of the trust, and the Appellant was the sole beneficiary. This meant he could not make withdrawals without the consent of the other trustee. The Appellant then claimed Universal Credit on 26 January 2017. The claim was rejected by the Department of Work and Pensions (“DWP”) on the basis that the Appellant had over £16,000 of capital.

There were various delays in the appeal process but judgment was finally given on the appeal on 1 July 2019.

It was agreed between the parties that the damages for a psychiatric injury that formed part of the settlement were in consequence of a personal injury. It was also agreed between the parties that any compensation received specifically in relation to false imprisonment (also referred to as “basic damages”) could not be in consequence of a personal injury.

This left the issue of aggravated damages. The DWP argued that these damages could not be considered to be awarded in consequence of a personal injury. However, the Judge disagreed and held that, applying the case of Thompson v Commissioner of the Metropolis [1997] 3 WLR 403, the aggravated damages were in consequence of a personal injury, and were thus to be disregarded for the purposes of entitlement to Universal Credit. As a result of this finding, at the time of applying for Universal Credit the Appellant’s capital was less than £16,000 and his claim should have been allowed.

However, it should be noted that whether aggravated damages can be held to be in consequence of a personal injury are likely to depend on the facts of each case. There is no bright line between damages for false imprisonment (which cannot be in consequence of a personal injury) and aggravated damages. Each case is likely to be determined on its specific facts. In cases where the damages have been awarded in an out of court settlement it can be difficult to ascertain exactly how the award has been reached. In the present case, it was possible to work out an approximation of the relative percentages of the global award that related to each head of damages by examining the without prejudice save as to costs correspondence between the parties, which had quantified each head of damages.

The Appellant had also advanced an argument that the monies were held in a discretionary trust. Monies held in a discretionary trust are ignored by the DWP until such time income or capital are paid out of the trust. However, this ground of appeal was dismissed. The Tribunal Judge found that the trust that had been set up was in fact a bare trust, rather than a discretionary trust. The definition of a discretionary trust is set out in the case of Mettoy Pension Trustees Ltd v Evans [1991] 2 All ER 513. This confirms that a discretionary trust is one where the trustee is “under a duty to select from a class of beneficiaries those who are to receive, and the proportions in which they are to receive, income or capital of the trust property.

The Judge found that the purpose of the trust was as a personal injury trust. As there were no other beneficiaries named in the trust or the potential for other beneficiaries, the trust was ruled to be a bare trust rather than a discretionary trust. This meant that the only sums of money in the trust that could be disregarded were those that were received in consequence of a personal injury.

Related Services:

Share this article

Contact

Contact us today

For a free initial conversation call 020 7485 8811

Email us Send us an email and we’ll get back to you






    More from WilliamVIEW ALL

    1. 13.9.2023

      Successful homelessness judicial review case against Redbridge Council

      This matter involved a claim in the High Court for judicial review against Redbridge Council for failure to comply with...

      Read more
    2. Man is making audit of household expenses
      21.4.2023

      Success in Court of Appeal in child disability...

      The Court of Appeal has today handed judgment in the case of Harrington v Secretary of State for Work and...

      Read more
    3. Churchill Gardens neighborhood in Pimlico
      20.1.2023

      High Court finds Westminster Council’s Housing Scheme...

      Westminster City Council’s housing allocation scheme found to be unlawful The High Court has today handed down judgment finding...

      Read more
    4. East London aerial view
      14.11.2022

      Housing allocation case questions lawfulness of council’s...

      Until February 2022, the social housing allocation scheme for the London Borough of Newham allowed people who lived outside the borough...

      Read more
    5. High Court of Justice, London, UK
      5.8.2022

      Legacy benefits uplift: appeal granted by Court of...

      Introduction to the case On 18 February 2022 the High Court dismissed the case brought by Osbornes Law on behalf of 4 claimants...

      Read more
    6. signing document
      23.12.2020

      EU Nationals with Pre-Settled Status entitled to benefits...

      Court Judgment means EU Nationals with Pre-Settled Status can access benefits and housing On 18 December 2020 the Court of Appeal handed...

      Read more
    7. 22.12.2020

      Osbornes applying to Supreme Court in housing possession...

      In the case of Gateway Housing Association –v- Begum (2) the Court of Appeal recently decided that a tenant must leave...

      Read more
    8. london apartments
      22.12.2020

      Housing disrepair issues resolved after three years

      Osbornes were instructed on behalf of a disabled tenant who had been decanted from her temporary accommodation for some three...

      Read more
    9. 24.11.2020

      Is the delay in the Renters Reform Bill...

      There have been issues tenants have faced for a long time before pandemic; namely no fault evictions and the other...

      Read more
    10. 20.11.2020

      Up Up and away to the First Tier...

      This year we assisted in written representations for a welfare benefit case in the Upper Tribunal. This is a Housing...

      Read more
    11. 20.11.2020

      You are homeless because you are in shared...

      It is well established that shared facilities are not suitable for families with children as long term accommodation. The client...

      Read more
    12. 29.4.2020

      Case news: Housing benefit decision addresses issue of...

      The background You might be forgiven for thinking that the question of whether a course is full time or part...

      Read more
    13. london house
      30.3.2020

      I have a disrepair issue can I withhold...

      Withholding rent is not your best course of action. I see the logic in using the non-payment of rent as...

      Read more
    14. 26.3.2020

      British child living with her mother in the...

      In AH v Secretary of State for Work and Pensions [2020] UKUT 53 (AAC), the claimant and her parents are British citizens. ...

      Read more
    15. 5.9.2019

      Possession – A New Dawn!

      On 21st July 2019 the Government launched a consultation to seek views on implementing their decision to remove section 21 of the...

      Read more
    16. osbornes law office
      16.4.2019

      Racism in Social Housing Allocation Scheme

      Introduction To The Case The case of R (Gullu) v the London Borough of Hillingdon and R(Teresa Ward and...

      Read more
    17. 25.3.2019

      Homelessness- The suitability of bed and breakfast accommodation

      There is tremendous pressure on local authorities to house individuals and families for many reasons including unaffordable private rents and...

      Read more
    18. 29.1.2019

      Anti-Social Behaviour Injunctions

      Landlords have the option to bring an injunction against tenants in the event they are committing anti-social behaviour. The injunction...

      Read more
    19. 5.11.2018

      Court of Appeal Clarifies the Definition of ‘Landlord’

      It is now not uncommon for home owners to enter into company let agreements with property companies who are authorised...

      Read more
    20. street
      23.9.2018

      How to deal with a Closure Order and...

      Over the last three years since the Anti-Social Behaviour Crime and Policing Act 2014 came into force Local Authorities and other...

      Read more

    VIEW ALL