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You are here: BAILII >> Databases >> UK Social Security and Child Support Commissioners' Decisions >> Wilkinson v. Chief Adjudication Officer [2000] UKSSCSC CIS_256_1998 (24 March 2000) URL: http://www.bailii.org/uk/cases/UKSSCSC/2000/CIS_256_1998.html Cite as: [2000] UKSSCSC CIS_256_1998

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Wilkinson v. Chief Adjudication Officer [2000] UKSSCSC CIS_256_1998 (24 March 2000)

R(IS) 1/01

(Wilkinson v. Chief Adjudication Officer)


Mr. P. L. Howell QC CIS/256/1998

12.8.98

CA (Evans, Potter and Mummery LJJ)

24.3.00

Capital - share in jointly owned testamentary gift of property occupied by other joint owner - whether share had a "current market value"

In August 1995, while the appellant was in receipt of income support, her mother died. By her will, the mother left her house to her children (the appellant and her brother) jointly. The house was not sold and remained empty until January 1997 when the brother moved into the property (with the consent of the appellant). The appellant's interest in the house was not disclosed to the Department of Social Security until April 1997. In May 1997 the adjudication officer valued the appellant's share of the house as being worth at least £8,000. Her benefit entitlement was therefore reviewed, and withdrawn on the basis that her capital exceeded the limit prescribed in regulation 45 of the Income Support (General) Regulations 1987. This had been so since the date on which the mother's will had been admitted into probate (20 September 1995) and it had become possible for her interest in the property to be realised. Before the tribunal, the appellant argued inter alia that her mother's wish had been that the house be used as a home for the brother and that this wish overrode the terms of the will.

The tribunal upheld the adjudication officer's decision. The appellant appealed to the Commissioner who dismissed her appeal. The appellant appealed to the Court of Appeal, contending that given the occupation of her brother, her share of the house was worthless throughout the relevant period for which she had received income support. Further, she was not entitled to insist on a sale of the house with vacant possession.

Held, dismissing the appeal (Evans LJ dissenting), that:

(per Mummery and Potter LJJ) under the will the appellant had inherited a half share in the house and as a beneficiary she was entitled to have the assets of the estate administered in accordance with the law and the terms of the will;

(per Mummery and Potter LJJ) the appellant could have obtained an order for the sale of the house with vacant possession if her brother was unwilling to buy her share or refused to agree to a sale. It was not a case like CAO v. Palfrey (R(IS) 26/95) where a property was acquired by joint owners for a collateral purpose which would be defeated if one of those acquiring the property were to insist on a sale while that purpose was still subsisting. In this case, an order for sale would give effect to the testamentary purpose of the testatrix. Neither the brother's share in the house, nor his rights in it, were any greater than those of the appellant either before or after he went into occupation;

(per Potter LJ) where a claimant is entitled to a half share in a dwelling house, the proper starting point for the valuation of that share is half the market value of the house with vacant possession; the value of the half-interest being discounted in respect of any factors materially affecting the ability of the claimant to market the dwelling house offering vacant possession at completion. In this case there was no evidence that the brother would have taken active steps, either before or after he went into possession, to resist a sale with vacant possession. Even if, after he had gone into possession, he had taken such steps, there were no good grounds on which he could resist the sale. That being so, while any valuation of the appellant's half share might in principle have required some discount on the basis that proceedings under section 30 of the Law of Property Act 1925 might have been necessary before the interest could be realised, such discount would be of an insubstantial nature.

DECISION OF THE SOCIAL SECURITY COMMISSIONER

1. This appeal by the claimant is dismissed, as in my judgment there was no error of law in the decision of the tribunal given on 15 October 1997 upholding that of the adjudication officer made on 20 May of the same year.
2. The decision of the tribunal as recorded in the statement of facts and reasons at pages 71-72 is in my judgment in all material respects a clear and accurate statement of the legal position in this case, based on a fair and correct assessment of the factual evidence placed before them. I can find no fault in it and I consider the support given by the adjudication officer to the claimant's appeal unfortunate, as the criticisms he makes of what was obviously a carefully considered decision by the tribunal (having of course a legally qualified chairman) themselves demonstrate a misunderstanding of some pretty basic principles of the general law. If more considered legal advice had been taken at an earlier stage, time and public expense in the way this appeal has proceeded could have been saved, and (at least equally important) false hopes in the mind of the claimant could have been avoided. The suggestion made in paragraph 22 of the written submission at page 146, that this was suitable for a short decision by consent in favour of the claimant, was on any footing wholly out of place in such a case.
3. I held an oral hearing of the appeal. The claimant appeared and presented her case in person, accompanied by her father who assisted her and also addressed me. Paul Brown of Counsel, instructed by the Solicitor to the Department of Social Security, appeared for the adjudication officer.
4. In addition to the oral submissions made to me at the hearing I have taken into account all the written submissions and material contained in the appeal file, running to some 270 pages. The claimant told me that although appearing in person at the appeal hearing she had had the benefit of legal advice, and this is apparent from the nature of some of the submissions and other material in the file.
5. The claimant is a lady now aged 46 who claimed and was paid income support continuously from 7 May 1993 to 20 May 1997 as a divorced woman with three young children to look after. At all material times she stated on the claim forms, order book declarations and other documents she was required to fill in for the purpose of obtaining income support that she had no capital or savings of any kind. Her attention was drawn in the usual way in her order books and in the department's literature to the need to inform the department at once if this should change and there can be no doubt that she was under a continuing duty to disclose to them any money, property or other capital asset that she should come into by way of inheritance on the death of someone else.
6. On 19 August 1995, the claimant's mother died, leaving an estate worth some £50,000. Her will made only two months previously on 16 June 1995 appointed the claimant one of her executors and by its terms left her an equal half share in all her assets including specific gifts of a half share of an £8,000 holding of income bonds and a half share in the mother's house and its contents.
7. It is clear from the papers in the appeal file (including documents submitted by the claimant herself, see e.g. p. 127) that she wholly failed to disclose this to the authorities at the time her mother died, or when she and her co-executor obtained probate shortly afterwards on 20 September 1995 (page 20), or for a further period of some 18 months during which she continued to draw income support as though
    
   

nothing had happened. In April 1997 she was visited by an officer of the department as a result of information received that she had an undeclared property, and following this a solicitor wrote to the department on 10 April 1997 (ps. 13-14) enclosing a copy of the mother's will and raising the contention that despite its apparent terms the assets from the mother's estate should not be counted as the claimant's capital for income support purposes, as she was then about to direct the executors that the entire benefit of the property should go to her brother.

8. The will is a home made one, but written in firm clear handwriting on a printed form, I think by the mother herself, and perfectly valid and effective. It was as I have said admitted to probate on 20 September 1995 on the application of the claimant and her co-executor. Its material provisions were as follows:

"I give and bequeath unto my daughter Barbara [the claimant] and my son Brian [the brother] equal shares in my assets including eight thousand pounds in income bonds and any other money in my bank account held at Barclays Bank, North St., Rugby. The property of 40 Ratcliffe Road and all contents to my daughter and son to do with as they wish. If my daughter should predecease me my grandson Toby to have her share. If my son predecease me my two grandsons Andrew and Marc to have his share."

There then followed directions about the testatrix's funeral arrangements. 40 Ratcliffe Road was the testatrix's house, owned and occupied by her at the date she died.

9. Following receipt of the solicitor's letter of 10 April 1997 (which was written on the basis that the claimant had received a gift under the will and realised this "could potentially have a bearing on her eligibility for income support" but was planning to relinquish it by agreement in favour of her brother: ps. 13-14), the adjudication officer asked the claimant to provide evidence of the value of the property. When she had not done so by 19 May 1997, he determined on the basis of local valuation knowledge that it must be worth at least £40,000, and that the claimant was therefore entitled under her mother's will to a share worth at least £8,000. In consequence, he determined (by way of revision of earlier decisions awarding her income support) that she was not entitled to income support because her capital exceeded the prescribed limit, nor had she been so entitled since the day probate had been granted and it had became possible for her interest in the property to be realised.
10. The claimant appealed to the tribunal which on 15 October 1997 upheld the adjudication officer's decision in all respects. They did so after having heard and taken account of oral evidence from the claimant, her co-executor, her father and her solicitor, all of whom attended the hearing, and submissions made by the professional welfare rights officer representing her. In particular they considered the terms of what was put before them as an uncompleted draft Deed of Variation, drawn up by the solicitor for the purpose of implementing the intention that the property was to be made over to the brother, a previous tribunal hearing convened for 25 September 1997 having been adjourned at the claimant's request for the specific purpose of producing further evidence about this (see ps. 64-65). The tribunal were told explicitly by the solicitor in the course of the hearing on 15 October 1997 that this had not yet been executed so as to become effective. The welfare rights officer also explained that it "has not been completed ... because it could be seen as deprivation of capital" (ps. 68-69).
11. There is no copy of any estate accounts or Inland Revenue account before me, but according to the co-executor's evidence at the hearing the testatrix's gross estate was some £60-65,000 (p. 70). Among the papers submitted by the claimant to the tribunal was a professional valuation of the property dated 26 June 1997, in the sum of £59,500 with vacant possession (ps. 23-25). Also before them was a copy court order dated 23 April 1990, in earlier divorce proceedings between the claimant's mother and her father, under which the house had become the mother's absolute property subject to a charge in favour of the father to secure a sum equivalent to 15/65ths of the net value of its proceeds of sale less costs of sale. That charge was still subsisting at the date of the mother's death, when it became enforceable (see p. 270).
12. Also before the tribunal, at pages 31-39, were copy documents evidencing further divorce proceedings in Australia involving the claimant's brother towards the end of 1996. He was then living there but seeking to be allowed to take his son to live in England, and proposing to the court that they would reside in the mother's house, stated to be "owned by my family". The Australian court accepted this proposal in December 1996 (p. 124) and by the time of the solicitor's letter on 10 April 1997 the brother was stated to be living at the property with his son. This remained the position at the time of the tribunal hearing on 15 October 1997, the evidence then given by the claimant as recorded on page 70 being that her brother was paying no rent but he was paying for the upkeep of the house. It was also in evidence that the claimant's father had refrained from enforcing his legal charge on her mother's death, he too being content with the arrangement that his son and grandson should be allowed to live in the house (p. 68).
13. The tribunal's findings of fact as recorded on page 71 set out the claimant's circumstances and the relevant terms of the will and probate, and that title to the property still remained registered in the name of the claimant's mother at the Land Registry. Paragraph 4 of their findings recorded that the property remained subject to the father's legal charge which had not been redeemed, and that the value of the property on 19 August 1995 (the mother's death) was £40,000. Notional expenses of sale would have been £4,000, and the value of the father's charge for 15/65ths of the net amount was therefore found by them to be £8,308. They further found as a fact that the value of the property had not fallen since 19 August 1995 to the date of their own decision on 15 October 1997, and consequently that:

"6. After allowance for notional costs of sale and redemption of the legal charge, the appellant is beneficially entitled to one half share of the net proceeds of sale of 40 Ratcliffe Road which at the date of the decision appealed against was £13,846".

That figure is based on their finding that the value had at no point after the testatrix's death fallen below £40,000. I interpose that on the basis of the professional valuation put in evidence by the claimant herself at page 23, the corresponding figure for the value of her interest as at 26 June 1997 (a month after the decision appealed against) would have been over £20,000 so their figure allows a substantial margin for error.

14. Giving the reasons for their decision the tribunal recorded the arguments that had been put before them by the claimant that she had understood her mother's wishes to have been that the house should be used as a home for her brother Brian. However:

"3. The tribunal found that, whatever [the testatrix's] indications to others had been prior to her death, her intentions shown on the face of her will were clear and unequivocal, there was nothing in the will that could be construed as an instruction that the property be held on trust by her son and daughter for her son alone. The effect of the will as written was that the appellant is beneficially entitled to a half share of the equity in 40 Ratcliffe Road and she is entitled to enforce a sale of the property at any time."

15. In the clearly expressed and reasoned paragraphs that follow on page 72 they referred to the terms of the beneficial gifts over in the event of the claimant or her brother predeceasing their mother as demonstrating that what was given to each was a beneficial share, the terms of the will being inconsistent with any other interpretation. As they held that the value of the claimant's share was and still remained in excess of £8,000, this alone disentitled her to income support as it exceeded the prescribed capital limit; so that the tribunal found there was no need to go on to consider the effect of the other property owned by her as a result of the will or otherwise.
16. Against that decision the claimant appeals, principally on the ground that the tribunal were wrong in law in the way they interpreted the will as entitling her to a beneficial share in her mother's house and not accepting that this was overridden by the evidence she and the other members of the family had given as to the desire to provide a home for her brother. She also criticises them for failing to take into account the terms of two documents: first a Deed of Disclaimer which bears the date 11 April 1997, the day after the original solicitor's letter, a copy of which is at page 106 among the documents dated 19 January 1998 submitted with her application to the Commissioner for leave to appeal. However there is no record of it among the documents she submitted with her appeal to the tribunal on 8 July 1997, listed at pages 19ff, and in the documents that she did then submit, the only reference (on p. 57) is to a "prepared Deed of Disclaimer" without any suggestion that one had already been executed. The second document she criticises the tribunal for not taking into account is also among those submitted by her when seeking leave to appeal, at pages 107-108: it is a signed Deed of Variation bearing the date 15 October 1997. This is in the terms of the draft placed before and fully considered by the tribunal, but when I specifically questioned her on the point the claimant made clear that it was not in fact signed and executed until after the tribunal hearing on that day had concluded.
17. In my judgment the claimant's contentions on these issues are unarguable, and the tribunal chairman was right to refuse her leave to appeal. Although the will appears to be a home made one written out by the mother in her own hand there can be no doubt that its express terms entitle the claimant on their true construction to a beneficial half share in the house and contents, as well as in the other assets specifically given and the remainder of the estate (which her contentions about having no beneficial interest and concerns that all should be vested in her brother, only raised it appears after she had been visited by the department, do not in any case address). The tribunal's reasoning on the interpretation and effect of the will is impeccable, and I cannot usefully add to it.
18. In my judgment they were also wholly right to reject the contentions made to them (and to me) that the terms of the will should be read as overridden in some way by some form of trust to give effect to different intentions, communicated by the mother before her death or agreed between the other members of the family subsequently. The terms of the will were, as they pointed out, completely inconsistent with this being what the mother intended. I would add that the solicitors' letter of 10 April 1997, which must have reflected the instructions given to them at that time, is also completely inconsistent with the notion of a binding trust already imposed on the claimant's share (consider the reference on p. 13 to "depending on whatever was agreed between our client and her brother"), and in any case there was and is no evidence of the kind that would be needed to establish the existence of such a trust as even arguable.
19. I am also quite unable to accept that in view of the evidence presented to them the tribunal erred in failing to investigate further the reference in the claimant's earlier letter on page 57 to "the prepared Deed of Disclaimer", or the document at page 106 if it was in fact placed before them in any form. The terms of that document are wholly inconsistent with all the evidence given by and on behalf of the claimant to the tribunal about the proposed draft deed of variation, as set out in particular in her representative's typed submission at page 61 and what was said by her and the claimant's solicitor at the oral hearing on 15 October 1997, 67 to 70. This proceeded, and was explicable, only on the basis that at the date of the tribunal hearing the claimant did still have whatever interest had been given to her under her mother's will and that in the words of the representative's written submission "arrangements and papers have been drawn up by her solicitor ... to transfer the deeds into her brother's name but this has been delayed by this decision as there was concern it would be seen as deprivation of capital." None of this, or the terms of the deed of variation itself, can be reconciled with the interest already having been effectively disclaimed some six months earlier. If (as she told me, but is wholly uncorroborated from the papers) a copy of the document was before the tribunal then it was rightly disregarded given the other documents and evidence placed before them; the only rational interpretation of the evidence being that those advising her had decided it had not been and should not be put into effect at all.
20. Since the Deed of Variation was avowedly put in front of the tribunal only as a draft which had not yet taken effect to alter the position at all, they were in my judgment entirely right to proceed on the basis that it had not yet done so, and that the assessment of the claimant's capital for income support purposes from the date of her mother's death on 15 August 1995 to that of their own decision on 15 October 1997 fell to be considered in accordance with the terms of the mother's will and that alone.
21. For those reasons I reject the claimant's grounds for her appeal. I go on to consider the adjudication officer's submissions in support of it.
22. In the written submission of 10 June 1998 supporting the appeal (ps. 140 to 146) the adjudication officer too submitted at para. 19 that the tribunal erred in failing to consider the effect of the Deed of Variation, as its execution by her must have amounted to a deprivation by her of a capital resource. Having regard to the explicit evidence put before the tribunal by the claimant's professional advisers that they were holding back from completing the arrangements embodied in the deed for the express reason that it could be a capital deprivation for income support purposes, it would appear to me virtually unanswerable that once it was put into effect there was indeed a capital deprivation with the requisite intent for the purposes of reg. 51, Income Support (General) Regulations 1987, SI 1987 No. 1967. However for the reasons already given I do not consider the tribunal can be criticised for failure to delve into this question or make findings about it, since the whole of the evidence presented to them was to the effect that no such arrangements had yet been completed, and all was still inchoate. As I have said, the claimant herself confirmed this to me by saying that the document on pages 107 to 108 was not in fact executed until after the tribunal hearing had been concluded. That ground of support for the appeal is therefore wrong, and is rejected.
23. The other three grounds, as set out in paragraphs 6 to 16 on pages 142 to 144, were that the tribunal had erred first in failing to make specific findings about whether an occasion had arisen for review of the claimant's continuing award of income support; second in holding the claimant entitled to any beneficial interest in the property at all, as until the estate had been fully distributed "the claimant has no capital at all which can be brought into account for income support purposes because the claimant did not have a beneficial interest in the property or a chose in action"; and third on the valuation of her capital, as even if it was correct to say that this was an equal beneficial share in the house their approach had been to divide the value of the net equity in the property by two instead of valuing the claimant's interest by itself as a separate asset.
24. At the appeal hearing before me Mr. Brown presented these arguments in a somewhat modified form founding principally on the tribunal's approach to valuation. This he submitted was flawed for the reason just given, and because no allowance had been made for the difficulties the claimant might experience in actually realising whatever interest she had. In particular he said there was a failure on their part to address when the claimant actually acquired a capital asset in a disposable form and what the nature of it was, and the possible effects on the value of her asset of the brother having taken up occupation of the property some time after the mother's death. He also said that if the question of a disclaimer having already been effected was raised before the tribunal it must have been an error of law for them not to deal with that as a separate issue in their decision, but for the reasons already given I do not accept that.
25. I deal first with the procedural point about the omission of any specific mention of the grounds for a review of the claimant's previous award of income support, even though Mr. Brown quite rightly did not place it at the forefront of his submission. In my judgment there was no arguable error of law shown here. It was completely obvious and beyond argument that grounds must have arisen for review of the claimant's previous continuing award of income support as soon as her mother died and the claimant became entitled to rights in respect of capital under her mother's estate. Even if the exact nature and value of those rights remained to be enquired into, her acquisition of them was plainly a material change of circumstances justifying a review under s. 25(1)(b), Social Security Administration Act 1992, to which the adjudication officer's submission on page 4, referred to by the tribunal in para. 8 of their reasons on page 72, quite properly drew their attention. The omission to repeat or refer at greater length to what was completely obvious and beyond dispute is not even arguably an error of law, and the passage from the Commissioner's decision in case CIS/60/1993 to which my attention is drawn (where the issue was not beyond question, and did not appear to have been addressed at all) is not to be read so literally.
26. The main issue on the points raised in support of the appeal by the adjudication officer therefore resolves itself into the tribunal's treatment of what rights in respect of capital the claimant did acquire under her mother's will, and how these should be valued for the purposes of assessing her resources for income support.
27. As to the nature of the assets she acquired in respect of her mother's house and the other property specifically given to her by the will, the adjudication officer's submission in para. 12 on page 143 that pending the proper completion of administration of the estate the claimant had no capital at all to be brought into account for income support purposes is founded on a rather basic misunderstanding of the authorities and the underlying principles in this area. It ignores the fact that the gifts under the will of the testatrix's two major assets, her house and her income bonds, were specific and not residuary gifts. The distinction drawn in the case of Commissioner of Stamp Duties v. Livingston [1965] AC 694 and by the Commissioners in R(SB) 5/85 between the rights of a residuary beneficiary in respect of an estate in course of administration, and those of a beneficiary under a trust with a proprietary interest in the underlying assets, has never had any application to property specifically devised or bequeathed by a will. Such property becomes in equity the property of the legatee as soon as the testator dies, subject only to the right of the personal representative to resort to it for the payment of debts if the remainder of the estate is insufficient for this purpose: see Snell's Equity, 29th Edition, page 342 and cases there cited, especially CIR v. Hawley [1928] 1 KB 578 at 583 per Rowlatt J; Re Neeld [1962] Ch 643 per Diplock LJ at 688.
28. Even in the case of a residuary beneficiary the proposition advanced in the adjudication officer's written submission is too wide. Pending the completion of administration, such a beneficiary or beneficiaries have valuable rights in respect of the capital assets of the estate including the right if all of full age to give directions to the personal representatives as to how those assets should be disposed of. Despite the historical distinction maintained in Livingston between trust assets and those in course of administration (so historically within the jurisdiction of the Court of Probate rather than the Court of Chancery), such rights are closely similar in practical effect to those of a beneficiary under a trust: see in particular Re Leigh's Will Trusts [1970] Ch. 277, per Buckley J at 282 to 283. They give the beneficiary something he can dispose of, and it is quite wrong to think of them as without value. The passage in the decision in R(SB) 5/85 to which my attention is drawn must (as I have no doubt the experienced Commissioners who formed the tribunal on that case thought it unnecessary to state explicitly) be read subject to, and in the context of, the basic principles I have just explained.
29. Turning therefore to the practical question on which Mr. Brown rightly focused his submissions, of how the claimant's rights in respect of the capital of her mother's estate should be valued, I am again of the opinion that the tribunal were clearly right in the approach they took. It was quite apparent from the evidence before them that there never was or had been any question of the executors needing to have recourse to the house for the payment of the testatrix's debts (which the claimant told me were limited to the usual domestic bills, though there was a very large phone bill for calls to Australia in what had no doubt been a very difficult time for the family as her brother's marriage was breaking up). The chairman's note of the co-executor's evidence on page 70 records that after paying the debts both the house and the income bonds were left for the beneficiaries, and there is no evidence whatever of any other outstanding claims or difficulties that could have prevented the immediate completion of administration as soon after the testatrix's funeral and the obtaining of probate as the parties wanted it.
30. On that evidence, the tribunal were in my judgment entirely right to identify and value the capital asset owned by the claimant from the date of probate onwards as being a one half beneficial share in the net equity in the property after discharge of the charge to her father and notional sale expenses of 10%. There were in the circumstances no grounds on which her co-executor, her brother or anyone else could have resisted a realisation of the property and the distribution of her share of the proceeds to her had she chosen to require it.
31. On any view of the valuation evidence, that beneficial share was worth very substantially more than the £8,000 maximum capital limit for income support. The kind of questions which arose in the case of CAO v. Palfrey [R(IS) 26/95] to which my attention was drawn, where the value of the notional share of a claimant who was a joint beneficial owner under reg. 52 of the Income Support Regulations fell to be discounted because of the rights of occupation of the other joint owner arising from the purpose for which the property was held on trust for sale, are simply inapplicable to the valuation of a share in property under a will which creates no such rights. Accordingly it appears to me to make no practical difference whether the tribunal regarded themselves as applying the method of valuation prescribed under reg. 52 from 2 October 1995 onwards (to which my attention is also drawn) or not. A normal method of valuation of the share itself as a separate asset, which is what the tribunal's findings of fact at paras. 4 to 6 on page 71 appear to me to show them as carrying out, would produce the same result.
32. They were also in my judgment right to value the claimant's interest on the basis of the house being able to be sold with vacant possession throughout the whole period covered by their decision, as the evidence before them did not show any arguable claim on the part of the brother to occupy the property for himself (before or after he actually did so) so as to impede a sale against his sister's wishes.
33. For those reasons I have concluded that the criticisms advanced by Mr. Brown and the adjudication officer of the way the tribunal valued the claimant's rights in respect of capital under her mother's estate are not well founded and I reject them. There being in my judgment no other arguable error of law in the tribunal's decision, the claimant's appeal against it must be dismissed.
34. I realise that this decision will have serious consequences for the claimant who is facing recovery proceedings by the department, under separate appeal to the tribunal and not before me. These will now have to go ahead, as the effect of my confirming the tribunal's decision is that she never was entitled to the substantial amount of income support she continued to draw over a prolonged period from the date she and her co-executor obtained probate in respect of her mother's estate; and the revision and termination of her entitlement to income support with effect from 20 September 1995 was correct. In human terms it is of course possible to be sympathetic for the position she now finds herself in as a result of her failure to disclose anything about her mother's estate for so long. However the legislation has to be applied in an equal and even-handed manner to all claimants, and it would be quite unfair to the others if she were to obtain any special advantage as a result of having (to put it no higher) awarded herself the benefit of such a very big doubt for so long. I mention this because she opened her submissions to me by criticising the department for acting on information received anonymously when they began to investigate her case. It needs to be made clear that such criticism was unjustified.

Date: 12 August 1998 (signed) Mr. P. L. Howell QC

Commissioner

The claimant appealed to the Court of Appeal. The decision of the Court of Appeal follows.


 


DECISION OF THE COURT OF APPEAL

Mr. R. Drabble QC & Mr. D. Forsdick (instructed by Messrs. Tyndallwoods, Solicitors) appeared for the Appellant.

Miss N. Lieven (instructed by Solicitor to the Department of Health and Social Security) appeared for the Respondent.

Judgment (reserved)

LORD JUSTICE MUMMERY: This appeal is concerned with the correct approach to the valuation of a person's share in a joint capital asset for the purpose of determining whether that person's capital exceeds the "prescribed amount" under the Income Support (General) Regulations 1987. If the recipient of income support has capital in excess of the prescribed amount (£8,000) he is disentitled from continued receipt of income support.

The claimant to income support in this case is Mrs. Barbara Wilkinson. She is a middle aged single parent who received income support for herself and three dependent children continuously from 7 May 1993 to 20 May 1997. Payment was made to her on the basis that she had no capital. In fact she had inherited a half share in a house on her mother's death in August 1995. She continued to draw income support after her mother's death and after the grant of probate to her mother's will of which she was an executrix as well as a beneficiary. Mrs. Wilkinson failed to make disclosure about her inheritance until a visit was made to her by an officer of the Department of Social Security in April 1997.

An issue then arose as to whether she had capital within the meaning of the regulations and, if so, whether the value of her capital exceeded the prescribed amount of £8,000. Both the social security appeal tribunal and the social security Commissioner held that she had capital the value of which exceeded the prescribed amount. She was treated in their decisions as having capital of more than £8,000 from 20 September 1995 (the date of probate) by reason of her interest under her mother's will.

The background to the appeal

Different arguments have been advanced on behalf of Mrs. Wilkinson at different stages in this dispute. It is convenient at the outset to attempt a summary of the salient findings of fact and of the decisions to date.

(1) Mrs. Olive Thomas (Mrs. Thomas) was Mrs. Wilkinson's mother. She died on 19 August 1995. By a will written in her own hand and dated 16 June 1995 Mrs. Thomas left a freehold house at 40 Ratcliffe Road, Rugby (the house), which was occupied by her and registered in her sole name at HM Land Registry, and all its contents to her daughter, Mrs. Wilkinson and to her son, Mr. Brian Thomas "to do with as they wish. If my daughter should predecease me my grandson Toby to have her share. If my son predecease me my two grandsons Andrew and Marc to have his share."

(2) Mr. Geoffrey Thomas, the ex-husband of Mrs. Thomas, was entitled by way of charge under a court order made in divorce proceedings on 23 April 1990 to a share of the proceeds of sale of the house. His share was 15/65 of the equity, less the costs of sale. That right became enforceable on the death of Mrs. Thomas.

(3) At that time Mr. Brian Thomas and his family were living in Western Australia. He was involved in divorce proceedings in the Family Court of Western Australia.

(4) On 20 September 1995 probate was granted to the executors named in the will, Mrs. Wilkinson and Mr. Gerald Abbott. The gross value of the estate was estimated at between £60,000 and £65,000

(5) The house was not sold. It remained empty until January 1997 in case it was required by Mr. Brian Thomas as his home. Mr. Brian Thomas and his son Marc then returned to England and started to live in the house. This was with the consent of Mrs. Wilkinson and her co-executor.

(6) On 11 April 1997 Mrs. Wilkinson executed a Deed of Disclaimer. She disclaimed the gift of the house to her under the will in favour of her brother in its entirety. The Deed was not relied on by Mrs. Wilkinson before the social security appeal tribunal. Both sides are agreed that this Deed has no direct relevance to the issues on this appeal.

(7) On 20 May 1997 the adjudication officer decided that the capital of Mrs. Wilkinson exceeded the prescribed amount (£8,000) by virtue of the value of the share which she was deemed to own in the house. She was not entitled to income support. As at 26 June 1997 the house was professionally valued (by Messrs. Smith & Green of Rugby) at £59,500 with vacant possession. The valuation of Mrs. Wilkinson's share namely £13,846 was arrived at by calculating the value of the net equity in the house, after payment in respect of Mr. Thomas's interest and after deduction of notional sale expenses of 10%.

(8) That valuation of her share in the house was and is disputed by Mrs. Wilkinson. That issue is at the heart of this dispute. Mrs. Wilkinson's main contention is that her share in the house was worthless throughout the relevant period for which she received income support. In brief, her argument is that Mr. Brian Thomas was entitled to occupy the house as a joint tenant after the death of his mother. Further, Mr. Brian Thomas and his son did in fact occupy it from January 1997 until it was recently sold. These facts meant that there was no market for her share in the house and that there was no means of her realising her interest in it. She therefore did not have capital in excess of £8,000.

(9) On 15 October 1997 Mrs. Wilkinson's appeal from the adjudication officer was dismissed by the social security appeal tribunal. In their reasons dated 29 October 1997 they held that the effect of the will was that Mrs. Wilkinson was "beneficially entitled to a half share of the equity in [the house] and she was entitled to enforce a sale of the property at any time." The tribunal rejected Mrs. Wilkinson's submission that the intention of Mrs. Thomas was that the house was to be used solely to provide a home for Mr. Brian Thomas and his son. They pointed out that Mrs. Thomas had not said this in her home-made will. The fact that this was not her actual intention was borne out by the gifts over of the house in favour of her grandchildren in the event of Mrs. Wilkinson or her brother pre-deceasing Mrs. Thomas. On the basis of the valuation evidence already mentioned, the tribunal held that the value of Mrs. Wilkinson's half share was in excess of £8,000.

(10) After, but on the same day as, the tribunal hearing on 15 October 1997 Mrs. Wilkinson executed a Deed of Variation making the house and its contents over to her brother "for his own use and benefit absolutely." The Deed stated that it was agreed between Mrs. Wilkinson and her brother that:

"... the testatrix intended that by the words in the will "to do with as they wish" the testatrix intended inter alia that [Mr. Brian Thomas] could take the gift of the [house] and all the contents in its entirety to the exclusion of [Mrs. Wilkinson] ..."

The executors were directed to distribute the estate accordingly.

A draft of the Deed had been produced to the appeal tribunal, but, as it was not executed, no findings of fact or law were made in respect of its effect. It is agreed by both sides that the Deed of Variation is not directly relevant to the issues on this appeal.

(11) On 12 August 1998 the social security Commissioner (Mr. Patrick Howell) dismissed Mrs. Wilkinson's appeal. He held that there was no error of law in the decision of the appeal tribunal. He agreed with the tribunal's construction of the will which expressly entitled Mrs. Wilkinson to a beneficial half share in the house and its contents. The terms of the will were not to be read as overridden by some form of trust to give effect to different intentions. He summed up the position of Mrs. Wilkinson as follows (para. 30):

"There were in the circumstances no grounds on which her co-executor, her brother or anyone else could have resisted the realisation of the property and distribution of her share of the proceeds to her had she chosen to require it."

He added at para. 32:

" ...The evidence before the [appeal tribunal] did not show any arguable claim on the part of the brother to occupy the property for himself (before or after he actually did so) so as to impede a sale against his sister's wishes."

He refused permission to appeal. Permission was granted by this court on 12 March 1999.

The statutory provisions and regulations

As it is argued by Mr. Drabble QC on behalf of Mrs. Wilkinson that the decision of the tribunal is erroneous in point of law, it is necessary to refer to the relevant legislation.

Section 124 of the Social Security Contributions and Benefits Act 1992 (the 1992 Act) provides that a person is entitled to income support if he has no income or his income does not exceed the applicable amount. Where a person is entitled to income support for a period the amount payable for that period is to be calculated in such manner as may be prescribed. That calculation applies to a period of less than a week which is the whole period for which income support is payable and to any other period of less than a week for which it is payable: section 124(5) and (6).

Section 134 deals with exclusions from benefit and provides that:

" (1) No person shall be entitled to an income-related benefit if his capital or a prescribed part of it exceeds the prescribed amount."

Section 136 provides that:

"(3) Income and capital shall be calculated or estimated in such manner as may be prescribed."

Regulation 45 of the Income Support (General) Regulations 1987 provides that:

"For the purposes of section 134(1) of the [1992 Act] as it applies to income support (no entitlement to benefit if capital exceeds prescribed amount)-

(a) except where paragraph (b) applies, the prescribed amount is £8,000;"

Under regulation 46 the whole of the capital of the claimant is to be taken into account with certain "disregards" in Schedule 10, and under regulation 49(a) the capital which a claimant possesses shall be calculated "at its current market value" with certain deductions such as incumbrances and 10% for sale expenses.

Regulation 51 is concerned with "Notional Capital" and provides that a claimant shall be treated as possessing capital of which he has deprived himself for the purpose of securing entitlement to income support or increasing the amount of that benefit." It is agreed that no reliance can be placed on that provision in this appeal as the point was not raised below and no findings of fact have been made in relation, for example, to the Deed of Disclaimer or the Deed of Variation.

held." The regulation was amended following the decision of this court in Chief Adjudication Officer v. Palfrey (The Times, 17 February 1995) [R(IS) 26/95]. But the regulation was later declared to be ultra vires as to part of the amendment. It is common ground that the relevant form of the regulation provides that:

"... where a claimant and one or more persons are beneficially entitled in possession to any capital asset they shall be treated as if each of them were entitled in possession to the whole beneficial interest therein in an equal share and the foregoing provisions of this Chapter shall apply for the purposes of calculating the amount of capital which the claimant is treated as possessing as if it were actual capital which the claimant does possess."

Under regulation 46(2), capital is to be disregarded in accordance with Schedule 10 in which para. 26 provides for the disregard of:

"Any premises where the claimant is taking reasonable steps to dispose of those premises, for a period of 26 weeks from the date on which he first took steps, or such longer period as is reasonable in the circumstances to enable him to dispose of those premises."

No argument has been addressed to the court on the application of that provision to this case.

Reference was also made to statutory provisions governing the power of the court, in the absence of agreement, to order a sale of jointly owned land held on trust.

Section 30 of the Law of Property Act 1925 empowered the Court in cases where trustees for sale refused to sell or to exercise their powers to:

"... make such order as it thinks fit."

This was repealed with effect from 1 January 1997 by the Trusts of Land and Appointment of Trustees Act 1996 and replaced by section 14 which provides that:

" (1) Any person who is a trustee of land or has an interest in property subject to a trust of land may make an application to the court for an order under this section."

The court may make such order "relating to the exercise by the trustees of any of their functions ... as the court thinks fit."

Section 15 refers to the matters relevant in determining such applications:

"(1) The matters to which the court is to have regard in determining an application for an order under section 14 include-

(a) the intentions of the person or persons (if any) who created the trust,

(b) the purposes for which the property subject to the trust is held,

(c) the welfare of any minor who occupies the property or might reasonably be expected to occupy any land subject to the trust as his home,

and

(d) the interests of any secured creditor of any beneficiary."

The legal position

I would dismiss this appeal on the ground that there was no error of law in the decision of the appeal tribunal and the social security Commissioner was right to dismiss Mrs. Wilkinson's appeal for the reasons given by him.

A. Capital.

The first question is did Mrs. Wilkinson have any capital during the relevant period during which she was in receipt of income support ?

The answer is now agreed to be "Yes."

Under the will she inherited a half share in the house. As a beneficiary under the will she was entitled to have the assets of the estate of Mrs. Thomas administered in accordance with law and with the terms of the will. It was argued at one stage that, until the administration of the estate was complete, it would not be known whether the house would be required for the purposes of administration. But the evidence does not suggest that there was ever any question of the executors needing to have recourse to the house for the payment of debts of Mrs. Thomas or that there was any other legal obstacle to the immediate completion of the administration and to an assent by the executors vesting the house in the names of Mrs. Wilkinson and her brother as joint owners holding the house upon trust for themselves in equal shares.

It was also contended at one stage that Mrs. Wilkinson had no capital because she held her share in the house on a secret trust, imposed by Mrs. Thomas outside the terms of the will and accepted by Mrs. Wilkinson, for the benefit of her brother absolutely. This submission was rejected and has not been pursued. It faced substantial factual and legal difficulties, not the least of which was the fact that the terms of Mrs. Thomas's will made it extremely improbable that she intended the entire house to go to Mr. Brian Thomas to the exclusion of Mrs. Wilkinson and her family. It is, however, contended that on the issue of valuation it is relevant to have regard to the alleged wish of Mrs. Thomas that her son should live in the house.

Arguments were also advanced at one time in relation to the Deed of Disclaimer and the Deed of Variation. They are now agreed to be irrelevant to this appeal, though they may become relevant to possible later arguments on a "deprivation" point under regulation 51. It is difficult to see how the Deeds could assist Mrs. Wilkinson in an argument that she had no capital during the relevant period when the Deeds appear to have been drawn and executed on the express basis that she in fact had a share in the house and that she was divesting herself of it in favour of Mr. Brian Thomas.

B. Current market value of capital

The second question is did the current market value of Mrs. Wilkinson's capital exceed the prescribed amount during the relevant period of receipt of income support?

Mr. Drabble QC submitted that the answer to this question was "No." Miss Lieven for the Department submitted that the answer was "Yes" for the reasons given by the appeal tribunal and the Commissioner.

Mr. Drabble's argument was an exercise in seeking to demonstrate that something is worth nothing. What has to be valued under the regulations is an equal share of the whole beneficial interest in the house. This has to be done week by week over the relevant period down to the hearing before the tribunal and without making any artificial assumptions about vacant possession of the house.

Mr. Drabble's starting point was to focus on the practical difficulties which Mrs. Wilkinson would encounter in attempting to realise her share in the house either before or after her brother was allowed into occupation of it with his son Marc. From the outset, it was contended, Mr. Brian Thomas had a right to occupy the house. Quite apart from the fact that this was claimed to be his mother's intention, that was his right as a joint tenant of the house under the terms of the will. Neither joint tenant is entitled to exclude the other from occupation of the joint property: Bull v. Bull [1955] 1 QB 234. In Mrs. Wilkinson's own words this made her share in the house "an unobtainable asset of nil value." Mr. Brian Thomas had a right to occupy the house. After January 1997 he exercised that right. He would not agree to a sale for the purpose of realising Mrs. Wilkinson's share. He was not willing to buy her share. Who else would be interested in buying the house or her half share in the house with him in occupation? There was no market for such an asset; it had no market value or only a nominal value.

Mr. Drabble contended that Mrs. Wilkinson was not entitled to insist on a sale of the house with vacant possession. If she had applied to the Court for an order for sale under section 30 there would have been delay and the outcome would have been adverse or would, at the very least, have been uncertain, because an order for sale would have deprived Mr. Brian Thomas of a home which he was intended to have for him and his son, if he needed it, and would have defeated his mother's purpose with regard to the house: Jones v. Challenger [1961] 1 QB 176; cf. Barclay v. Barclay [1970] 2 QB 677 at 684. The severe adverse impact of the uncertainties, delay, costs and difficulties on the marketability of the house and its market value and the market value of her share in it had not been properly taken into account in the valuation by the tribunal. The valuation was erroneous in law because it was made on the false basis that Mrs. Wilkinson was entitled to enforce a sale of the house at any time.

Mr. Drabble submitted that after the 1996 Act came into force it would have been even more difficult to say that Mrs. Wilkinson's share had any value on account of the statutory and factual obstacles in the way of an order for the sale of the house against the wishes of Mr. Brian Thomas. There was no legal duty to sell property held on trust for sale. He pointed to the matters in section 15 of the 1996 Act to which the court would have to have regard in determining an application for an order for sale: the trust was created by Mrs. Thomas who (as the uncontradicted evidence of Mrs. Wilkinson showed) intended the house to be a home for her son; that was therefore the purpose for which the house was held on trust; and the house was occupied by Marc as well as by Mr. Brian Thomas and Marc was a minor whose welfare was a relevant matter.

I am unconvinced by these arguments that there was any legal error in the approach adopted by the tribunal and the Commissioner. I have no doubt that Mrs. Wilkinson could have obtained an order for the sale of the house with vacant possession if Mr. Brian Thomas was unwilling to buy her share from her at its market value or refused to agree to such a sale. Mrs. Wilkinson's share in the house came to her as an inheritance on her mother's death. It was a gift by Mrs. Thomas jointly to her two children in equal shares. It was an absolute gift in the sense that there was no restriction or superadded purpose expressed in the will. This was not a case like Palfrey where property was acquired by joint owners for a collateral purpose, such as accommodation for both joint owners, and that purpose would be defeated if one of those acquiring the property were to insist on a sale while that purpose was still subsisting. In such a case there is, as Hobhouse LJ said "nothing obscure or abstruse in the conclusion that the amount of capital which the applicant's joint possession of that dwelling house represents may fall, for the time being, to be quantified in a nominal amount."

On the contrary this is a case where an order for sale would give effect to the testamentary purpose of Mrs. Thomas in leaving the house to both of her children for the benefit of both of them equally. Mr. Brian Thomas's share in the house and his rights in the house were no greater than those of Mrs. Wilkinson, either before or after he went into occupation. If he wished to remain in occupation of the house he could only justly do so on payment to Mrs. Wilkinson of the value of her share or at least payment to her of a market rent. If he were not able or willing to do that a sale with vacant possession was inevitable if the terms of Mrs. Thomas's will, which in law must be treated as her final binding wishes (see Halsbury's, Laws Vol 50, para. 393), were to be carried into effect.

Conclusion

I would dismiss the appeal.

I add that this court is not concerned on this appeal with possible recovery proceedings by the Department against Mrs. Wilkinson as a result of her failure to notify a material change of circumstances concerning her capital after her mother's death.

LORD JUSTICE POTTER: I agree with the judgment of Lord Justice Mummery and would add this.

The history of this case suggests that Mrs. Wilkinson's actions in relation to the sale of the house which her mother bequeathed to her jointly with her brother in Australia, may largely have been dictated by her desire to allow her brother (with his son) to live rent-free in the joint asset on return to this country, rather than to preserve her own capital, or augment her own income, in a manner which would adversely affect her continuing right to receive income support. Her decision on her own account and/or as executrix of her mother's will to defer any attempt to sell or require sale of the house before her brother's return to take up residence, as well as her execution of the Deed of Disclaimer and Deed of Variation referred to in paragraphs (9) and (10) of the judgment of Mummery LJ under the heading "The background to the appeal" might certainly so suggest. There seems no reason to doubt that her motive has been a genuine belief that that is what her mother would have wished. However, while such considerations may be of relevance to proceedings contemplated by the Department of Social Security (DSS) for recovery of payments made, on the grounds of Mrs. Willkinson's failure to notify the DSS of a material change in her circumstances, they are not of relevance to the appeal in this case. Similarly, for reasons already mentioned by Mummery LJ, the court is not concerned with the question of whether or not Mrs. Wilkinson should be treated as possessed of "notional capital" of which she has deprived herself for the purposes of securing or increasing her entitlement to income support under regulation 51. The appeal is concerned solely with questions relating to the proper valuation of capital under regulation 49.

The essence of Mr. Drabble's argument has been that, once Mrs. Wilkinson's brother had expressed a wish to occupy, and had later occupied, the house, any valuation exercise carried out from week to week had to be conducted in the light of that situation. Consequently, for the purpose of assessing the capital value of Mrs. Wilkinson's half-share in the house, a substantial discount was necessary from the figure yielded by a valuation "with vacant possession": see paragraph (7) of Mummery LJ's judgment. Such discount would be likely to produce a figure less than £8,000 as the value of Mrs. Wilkinson's half-interest. Indeed, Mr. Drabble submitted it was to be doubted if there was any "market" in her equal share at all. He went on to submit that, that being so, and no evidence having been addressed to such issues before the Commissioner, it is to be inferred that the Commissioner was in error in the valuation which he made.

Like Mummery LJ, I am not persuaded by that reasoning. It is based upon the assumption that Mrs. Wilkinson would not in practice be able to offer the house for sale with vacant possession save with the consent of her brother; that such consent would not be forthcoming; and that, since the brother had an arguable basis for resisting a sale under s. 30 of the 1925 Act, or more recently under s. 14 of the 1996 Act, the timescale of the litigation necessary to obtain an order for sale would mean that the house was in practice unmarketable.

So far as regulation 49 is concerned, it has not been in dispute that the exercise of assessing Mrs. Wilkinson's capital available to be taken into account (being capital not excluded by the "disregards" in regulation 46) required the valuation of her half-share at its current market value; see the effect of regulation 52 and the decision in Chief Adjudication Officer v. Palfrey [R(IS) 26/95]. Equally, as it seems to me, in the case of a claimant entitled to a half-share in a dwelling house and/or its proceeds of sale, the proper starting point for the valuation of the claimant's share is half the market value of the house with vacant possession, the value of the half-interest being discounted in respect of any factors materially affecting the ability of the claimant to market the dwelling house offering vacant possession at completion, thus realising the full amount of the claimant's interest.

In this case, the right of Mrs. Wilkinson as a beneficial part-owner, to require a sale of the house in order to realise her interest, coupled with her power qua executrix to effect such a sale with vacant possession, were in practice unobstructed by the presence of her brother throughout the period between 20 September 1995 (when probate was obtained) until January 1997, when the brother became free to leave Australia and take up residence. There was no evidence before the Commissioner that, had Mrs. Wilkinson put the house on the market with vacant possession, her brother would or could have taken any steps to resist such a sale on the grounds of his (or indeed his mother's) wish that he should occupy the house. Had he offered resistance so that, in practice, the proposed sale was delayed pending the resolution of s. 30 proceedings, I can see no reason why Mrs. Wilkinson would not have been protected by regulation 46(2) so as to exclude the value of her half interest from the assessment of her capital under the regulations. However, that is strictly by the way. Once the brother was in possession, it is again not clear that he would have taken active steps to resist proceedings by Mrs. Wilkinson or the executors for an order for sale with vacant possession in order to realise Mrs. Wilkinson's half interest. Had he done so, however, I agree with the assessment of the Commissioner that there were no good grounds upon which he could resist the sale. It certainly cannot be said that the Commissioner erred in so assessing the position. That being so, while any valuation of Mrs. Wilkinson's half share for the purpose of her weekly payment of benefit might in principle have required some discount on the basis that s. 30 proceedings might be necessary before the interest could be realised, such discount would be of an insubstantial nature. Certainly there is no reason to suppose that the market value of her half interest would have been reduced to a lesser amount than £8,000.

I too would dismiss the appeal.

LORD JUSTICE EVANS: Mrs. Wilkinson's mother Mrs. Thomas died on 19 August 1995. She left her home jointly to her daughter, Mrs. Wilkinson, and her son Mr. Brian Thomas, with a prior charge on the proceeds of sale of the house in favour of her ex-husband Mr. Geoffrey Thomas. Her homemade will dated 16 June 1995 left the house to them "to do with as they wish", with a further provision that if either of her children were to pre-decease her, her grand-children by that child should have their parent's share.

The will was made only two months before Mrs. Thomas' death. Its terms reflect what little we know of the family's situation then. Mrs. Wilkinson was a single parent living with her son Toby in her own house and in receipt of income support. Her brother Mr. Brian Thomas was living in Australia but was in the process of separating from his wife and he intended, when it was possible for him to do so, to return to this country with his two children. Mrs. Wilkinson asserts that he planned to live in his mother's house and that Mrs. Thomas wished him to be able to do so. There is no reason for us to doubt this. Mrs. Thomas could not be certain when or even whether her son would be free to return, and so she used the words that she did, leaving it to the good sense of her two children to make the necessary arrangements when the time came.

In the result, Mrs. Wilkinson became joint owner of the property with her brother. She was also an executrix of her mother's will. She did what she thought her mother wanted. She agreed to the house remaining empty until January 1997 when her brother did return and moved into it with his children. She continued to live in her own home and to receive income support. The issue raised by this appeal is whether she was entitled to receive it until 20 May 1997 when payments were stopped. We are not concerned with any claim by the Department to recover sums paid before 20 May 1997. The issue decided by the appeal tribunal and the Commissioner, from whom this appeal is brought, is whether Mrs. Wilkinson had capital in excess of £8000, the "prescribed amount", from the date of probate, which was 20 September 1995.

For the reasons explained by Mummery LJ, it becomes necessary to consider what the position would have been if Mrs. Wilkinson had applied to the Court for an order for sale of the house against the wishes of her brother, under section 30 of the Law of Property Act 1925 or, after 1 January 1997, under sections 14 and 15 of the Trusts of Land and Appointment of Trustees Act 1996.

The judgment of this Court in CAO v. Palfrey [R(IS) 26/95], of which we have seen the transcript, shows that the value of her half-share has to be arrived at on the basis that that is her independent property, not merely as one-half of the market value of the whole property if it was sold with vacant possession. She could only realise one-half of that amount if the Court was prepared to order sale on those terms notwithstanding her brother's wish to occupy the house and subsequently his actual occupation. He could not claim any right to live there, beyond his own status as beneficial joint owner, as Mrs. Wilkinson also was. But she was prepared for him to do so because that was what her mother wished. Ultimately, therefore, the question is whether her interest has to be valued on the basis that she should ignore those wishes and bring about a sale of the house with vacant possession (or charge her brother a market rent for living there).

On a notional application under section 30 of the 1925 Act, the Court would have had to consider what effect, if any, to give to Mrs. Wilkinson's intention of carrying out her mother's wishes. No trust had been imposed. The argument that there was a secret trust has been abandoned. Does the law recognise the natural force of a deceased's parent's wishes?

The position under section 30 of the 1925 Act was considered by the Court of Appeal in Jones v. Challenger [1961] 1 QB 176. The leading judgment was given by Devlin LJ. He referred to In re Mayo [1943] Ch 302 where Simonds J said:

"The trust for sale will prevail, unless all three trustees agree in exercising the power to postpone." (p. 304)

But that "was a simple uncomplicated case of a trust for sale of freehold property, where the beneficiaries were brother and sister, and where there was no suggestion that either of them were intended or even wished to occupy the property" (per Devlin LJ at 181).

In Jones v. Challenger the Court held that the test to be applied under section 30 was whether it was inequitable to make the order for sale where one of the joint beneficiaries, who in that case were ex-husband and wife, wished to realise their investment in the property. Devlin LJ said this, after referring to In re Mayo:

"But this simple principle cannot prevail where the trust itself in the circumstances in which it was made show that there was a secondary or collateral object besides that of sale ... it is at any rate wrong and inequitable for one of the parties to the trust to invoke the letter of the trust in order to defeat one of its purposes, whether that purpose be written or unwritten, and the Court will not permit it." (p. 181)

He then referred to a number of earlier decisions, including In re Buchanan - Wollaston's Covenant [1939] Ch 738 from which it was plain that "the Court has a complete discretion to do what is right and proper, and will not allow the voice of the man who is in breach of his obligation to persist" (p. 181). There, the obligation was an express covenant entered into between four joint owners after they had purchased the property, by which they had agreed to preserve it as an open space. In other cases, particularly Bull v. Bull [1955] 1 QB 234, the joint tenancy was created for a particular purpose, and an order for sale was refused where the effect would be to defeat the purpose. Devlin LJ concluded:

"I see no inconsistency between these four cases and In re Mayo, in which no collateral purpose was manifest. There is, as I have said, something akin to mala fides if one trustee tries to defeat a collateral object in the trust by arbitrarily insisting on the duty of sale. He should have good grounds for doing so and, therefore, the Court will inquire whether, in all the circumstances, it is right and proper to order the sale." (p. 183)

The provisions of the 1996 Act are more explicit. The application for an order that the trustees shall exercise their power of sale is made under section 14. Section 15 provides:

"15(1) The matters to which the court is to have regard in determining an application for an order under section 14 include-

(a) the intentions of the person or persons (if any) who created the trust

(b) the purposes for which the property subject to the trust is held,

(c) the welfare of any minor who occupies or might reasonably be expected to occupy any land subject to the trust as his home, and

(d) the interests of any secured creditor of any beneficiary."

In January 1997, when the Act took effect, Mr. Wilkinson's brother and co-trustee and his two children were about to move into the house, pursuant to her mother's wishes. Her father, who held a charge over the property, did not seek to have his security realised. Subsections (a) to (b), therefore, were relevant to an application by Mrs. Wilkinson under section 14, and subsection (d) presented no bar to it.

In my judgment, there is no significant difference in the circumstances of the present case between the matters relevant to the Court's exercise of its former power to order sale under section 30 of the 1925 Act and those which section 15 of the 1996 Act expressly require shall be included among the matters taken into account. Miss Lieven for the respondent submits that there was no express trust, nor is it now alleged that that was a secret trust in favour of Mr. Wilkinson's brother living in the property; and she further submits that there is insufficient evidence that the trust for sale was created with the collateral purpose that the house should provide a home for Mrs. Wilkinson's brother and his children. The situation when Mrs. Thomas died, she submits, was uncertain, and there was no clear intention that the property would be used by the brother or any of his children. Nor, she submits "is it at all clear whether it is alleged that the trust [sc. collateral purpose] was for the son to live in the house until his child/children left home or indefinitely" (skeleton argument para.12).

I find myself unable to accept these submissions, attractively though they were presented to us. I would hold, first, that the collateral purpose identified by Devlin LJ does not have to be an express or implied term of the trust, save in the sense that the Court will further the purpose when it would be inequitable not to do so, taking account also of the circumstances as they are at the date of the application (cf. under the 1996 Act, the ages of the children). Secondly, the present case in my judgment is one where, on the limited amount of evidence before us, there are clear grounds for holding that the collateral purpose alleged by Mrs. Wilkinson can be established.

I therefore would hold that the Commissioner erred in law in rejecting the claim as he did. I would have allowed the appeal and found in Mrs. Wilkinson's favour that her joint interest should be valued in accordance with Palfrey v. CAO
 


[R(IS) 26/95] and on the basis that her application for an order for sale would probably have failed. It is a matter for regret if the law does not permit this result.

I can understand that the respondent is anxious lest a decision in Mrs. Wilkinson's favour should establish a precedent in favour of these receiving income support whose parents die leaving them an interest in a house worth more than £8000 if the market value is realised. But the present case is not a prototype. In different circumstances, were the brother not living in Australia and his ability to return to this country not doubtful, then it seems likely that Mrs. Thomas would have expressed her wishes more definitely in his favour, given that Mrs. Wilkinson had no need to occupy the house herself. As for Miss Lieven's concerns about changing circumstances, it seems to me that these are the factors which the Court is required by section 15 of the 1996 Act to take into account. Mrs. Wilkinson's ability to obtain an order for sale with vacant possession, and therefore the value of her joint interest, must vary over time. For present purposes, it is necessary to have regard to the situation as it was in 1995/7.

Order: Appeal dismissed. No order for costs, save legal aid assessment. Permission to appeal to the House of Lords refused. (Order does not form part of the approved judgment)