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Case No: SSTRF 1999/0277/C
IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE SOCIAL SECURITY
COMMISSIONERS
UNDER SECTION 24 OF THE SOCIAL SECURITY
ADMINISTRATION ACT 1992
Royal Courts of Justice,
Strand, London, WC2A 2LL
Friday 24 March 2000
B e f o r e :
LORD JUSTICE EVANS
LORD JUSTICE POTTER
and
LORD JUSTICE MUMMERY
- - - - - - - - - - - - - - - - - - - - -
|
BARBARA
ANNE WILKINSON
|
Appellant
|
|
-
and -
|
|
|
THE
CHIEF ADJUDICATION OFFICER
|
Respondent
|
- - - - - - - - - - - - - - - - - - - - -
(Transcript of the Handed Down Judgment of
Smith Bernal Reporting Limited, 180 Fleet Street
London EC4A 2HD
Tel No: 0171 421 4040, Fax No: 0171 831 8838
Official Shorthand Writers to the Court)
- - - - - - - - - - - - - - - - - - - - -
Mr Drabble QC & Mr David Forsdick (instructed by Messrs Tyndallwoods
Solicitors for the Appellant)
Miss Nathalie Lieven (instructed by Solicitor to the Department of
Health and Social Security for the Respondent)
- - - - - - - - - - - - - - - - - - - - -
Judgment
As Approved by the Court
Crown Copyright ©
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 £13846 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.
There is specific provision in Regulation 52 about "Capital jointly held." The
Regulation was amended following the decision of this court in Chief
Adjudication Officer v Palfrey (The Times 17 February 1995). 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 I 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. 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
20th 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 home-made 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 L.J., 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 C.A.O. v. Palfrey, 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 Q.B. 176. The leading judgment
was given by Devlin L.J. 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 L.J. 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 L.J. 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 Q.B. 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 L.J. 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. Sub-sections (a) to (b|), therefore, were
relevant to an application by Mrs Wilkinson under section 14, and sub-section
(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 L.J. 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. C.A.O. 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 herwishes 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)
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