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You are here: BAILII >> Databases >> England and Wales Court of Appeal (Civil Division) Decisions >> Wilkinson v Chief Adjudication Officer [2000] EWCA Civ 88 (24 March 2000)
URL: http://www.bailii.org/ew/cases/EWCA/Civ/2000/88.html
Cite as: [2000] EWCA Civ 88
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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
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 does not form part of the approved judgment)