England and Wales Court of Appeal (Civil Division) Decisions

IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE UPPER TRIBUNAL
ADMINISTRATIVE APPEALS CHAMBER
JUDGE CHARLES TURNBULL
Commissioner Case No CIS/213/104 & CIS 214/04

		Royal Courts of Justice Strand, London, WC2A 2LL
		27/11/2009

Lord Justice Mummery :

Introductory

1. Since 15 March 2000 Mr Stephen Martin (the Claimant) has been registered as the owner of a house and adjoining land in France at 59 Rue Prosper Roux, Poullaouen, Brittany (the Property).
2. For many years the Claimant claimed and received income support on the ground that he was unfit for work. He did not disclose to the Department for Work and Pensions the existence of the Property or the fact that it was in his name. Those facts came to light in the course of the Department's investigations and in an interview with the Claimant. At first the Claimant denied that he had any properties in France. When confronted with the documentary evidence he admitted that the Property was in his name, but said that it belonged to a Ms V. For a time he even asserted that the Property was subject to a tontine, a claim which is no longer pursued.
3. The Claimant unsuccessfully pursued appeals to the Appeal Tribunal (Colchester) and then to the Social Security Commissioners against the Department's decisions relating to his income support entitlement and to consequential overpayment recoverability. The Department made the decisions as long ago as August and October 2002. In the course of the appeals the Claimant put in evidence a document dated 1 December 1999 and an agreement in writing signed by him and Ms V dated 1 February 2001, but it was held that those documents were fabricated. Ms V also made a witness statement.
4. The issue in this court is whether the Social Security Commissioner who heard and determined the Claimant's appeals (Mr Charles Turnbull, who is now a Judge of the Upper Tribunal, Administrative Appeals Tribunal) erred in law in holding on 29 August 2008 that there was no reason why the value of the Property should not be included in the Claimant's "capital" for the purposes of the Income Support (General) Regulations 1987 (the 1987 Regulations) and s134 (1) of the Social Security Contributions and Benefits Act 1992 (the 1992 Act). If the value of the Property is "capital" exceeding the prescribed amount of £8,000, the Claimant was excluded from income-related benefits.
5. The Secretary of State relied on the Commissioners' case law that it is for a social welfare claimant to show that he does not have a beneficial interest in property of which he is the legal owner: CIS/30/1993. As for the calculation of capital the Secretary of State referred to the general rule that the whole of a capital resource is to be taken into account and that liabilities (other than debts secured on the capital asset) cannot be deducted: see Regulations 45, 49 and 50 of the 1987 Regulations and the decision in R(SB) 2/83.
6. The principal dispute is whether English law or French law is the applicable law for determining the nature and extent of the Claimant's rights in the Property.
7. The Claimant's case is that the applicable law is English law under which he holds the Property on an implied trust (resulting or constructive) for the person (Ms V) who provided the purchase price and the costs of its renovation. On that analysis the Property was not and is not his capital.
8. The Secretary of State's response is that the applicable law is French law, under which there is no implied trust of the Property. The Claimant owns it absolutely, so that it was and is his capital for the purposes of the 1987 Regulations.
9. The proceedings have a long history stretching back to 2002. There was an earlier appeal to this court resulting in the remission of the matter, which was then reheard by Judge Turnbull. This appeal is only concerned with whether there was an error of law in his Final Decision of 29 August 2008, taken together with his Interim Decision of 18 September 2007 setting out most of the facts and arguments.
10. Jacob LJ granted permission to appeal on all the grounds, save for the Claimant's challenge to the Commissioner's findings of French law. That ground is the subject of the Claimant's renewed application for permission, which was listed for hearing with the appeal.

Facts

11. The Claimant and Ms V are both domiciled in England. They live together in the same house in Essex, as friends, not as partners. They have one child, a son, Steve, who was born in 1988 and lives with them. Ms V has four adult children from another relationship. They are married. Ms V considers that they are already provided for.
12. On 15 March 2000 the Property was registered in the name of the Claimant on completion of its purchase. Ms V provided the whole of the purchase price (about 214,000 Francs-£21,000) with the help of a bank loan. She also provided sums totalling about £30,000 spent subsequently on renovating the Property. She said that the Property was purchased for use as a holiday home and for letting out. The Property was eventually sold and, according to Ms V, the Claimant used the proceeds to support himself, his income support benefits having ceased. The Claimant said that he was ordered by the benefits agency not to give the proceeds to Ms V.
13. On the same date as the purchase and on the advice of a French notaire the Claimant executed a holograph Will bequeathing a usufruct of the Property (described as "mon propriete") to Ms V. It was hoped that the combined effect of the Property being in his name and of his Will would be that, under French law, on his death his son Steve would inherit half the Property with Ms V and she would have the usufruct of the remainder.
14. As recorded in the Interim Decision it was common ground that

"2. … the reason why the Property was purchased in the Claimant's name was that, if it had been conveyed to Ms V, under French succession law her five children would have been entitled to an interest in the Property on her death, whatever the terms of her Will. However, Ms V wished to provide only for Steve, and under French succession law he would inherit on the Claimant's death."

15. It was also found that, in discussions between the Claimant and Ms V about buying the Property in his name, they both understood that

"36 … during Ms V's life she, rather than the Claimant, would determine whether the Property was sold and that if the Property were sold Ms V would be entitled to the proceeds of sale. As Mr Croally submitted, the only alternative is that Ms V intended to make a gift of the Property to the Claimant, and it is in my view unlikely that Ms V intended that."

Commissioner's decision

16. The Commissioner concluded that French law was the applicable law for determining the existence of the putative implied trust. Under French law there was no implied trust or any other reason why the value of the Property should not be included in the Claimant's capital.
17. The Interim Decision contained a succinct summary of the Commissioner's reasons for holding that French law was the applicable law-

"56. …the factors in favour of French law being the applicable law are (a) that the Property is in France (b) that the objects of the trust were to be substantially fulfilled with France (c) that the parties undoubtedly intended French law to apply after the Claimant's death and (d) that the Claimant appears to have believed that even during the Claimant's life the necessary protection for Ms V was provided by the French will. The factors in favour of English law being the applicable law are that the settlor, trustee and beneficiary are in England, and that discussions about the purchase would have taken place in England.

57. This is not of course a question simply of the numbers of factors on either side, but also of the relative weight which should, in the circumstances of the particular case, be attached to each factor. In my judgment, looking at the matter as a whole, the putative trust was more closely connected with France than with England…"

18. The reasons for the ruling that the putative trust was more closely connected with France than with England were expanded in the 2008 Final Decision-

"8. ….. I think that there is a lot to be said for the outcome to be determined in accordance with the law of the country which was sought to be circumvented, rather than (as the Claimant in effect contends was intended) partly (i.e. as to the beneficial interest during the Claimant's lifetime) by English law and then (after the Claimant's death if the Property is then still vested in him) by French law."

19. As for the content of French law to be applied, the Commissioner had two expert opinions on French law which the Secretary of State had obtained for him from Mr KJ Croft and Ms Dawn Alderson. The Commissioner made the following findings-

"9. ….I am unable to reach the conclusion on the balance of probability that Ms V would have any cause of action under French law, were the Claimant to sell the Property and keep the proceeds. Further it seems that at most she would have a monetary claim against the Claimant for the amount of the purchase price paid by her. In my judgment such a claim would not prevent the Property being included in the Claimant's capital for the purposes of s 134 of the 1992 Act: it would not give Ms V a proprietary claim to the Property or the proceeds."

20. Mr Croally, who appeared for the Claimant, submitted to the Commissioner that another opinion on French law was necessary to clarify the legal position. The Commissioner held that the second opinion obtained from Ms Dawn Alderson addressed the questions that had been put to her.

Applicable law: Claimant's submissions

21. Mr Croally made two opening points.
22. First, it is a principle of the social security scheme that people seeking benefits are expected to dip into their own capital first (see Secretary of State for Work & Pensions v. Hourigan [2003] 1 WLR 608 at paragraph 24 on p 614G): the scheme does not operate on the principle that people are expected to dip into someone else's capital first. In this case the Property belonged to Ms V beneficially. It was not the Claimant's capital for him to dip into.
23. Secondly, the mere fact that a capital asset is held in a person's sole name does not mean that it belongs to that person for all purposes. For example, if a social welfare claimant is appointed an express trustee of assets held in trust for others, it does not follow that assets held by him in the trustee capacity are relevant to his entitlement to income-related benefits. The assets would be more relevant to the entitlement of a trust beneficiary claiming income- related benefits.
24. Mr Croally then turned to the favourable findings of fact on key points: that the whole of the purchase price and the cost of the renovations were paid by Ms V; that she had not intended to make a gift of the Property to the Claimant; that it had been agreed that she would decide whether it was sold and that, if it was sold, she would be entitled to the proceeds. On those facts Mr Croally said that English law was clear. There was an implied trust (either resulting or constructive) of the Property for Ms V. That meant that the Property could not properly be regarded as the Claimant's capital within the statutory provisions invoked by the Secretary of State. On well established legal principles the fact that the Property was an immovable situated in France did not preclude the existence of an implied trust governed by English law and enforceable in the English courts: Webb v. Webb [1991] 1 WLR 1410; Lightning v. Lightning Electrical Contractors Ltd CA 23 April 1998. Those authorities were cited by Mr Croally as analogous to the present case. They were both instances of parties based in England, of immovable property situated in another jurisdiction (France and Scotland respectively) and of the foreign property being held on an implied trust governed by English law. The decisions were on the applicable law, not just on the jurisdiction of the English courts to enforce an implied trust of foreign property. Although there are obviously factual differences between those cases and this case, it was contended that the principles laid down in them applied here.
25. According to Mr Croally English law was the naturally applicable law, being the law most closely connected with the putative trust both at common law and for the purposes of Article 7 of the Hague Convention, as set out in the Schedule to the Recognition of Trusts Act 1987. That was the simplest and most satisfactory way of dealing with this case. The arrangement between the Claimant and Ms V bore all the hallmarks of an implied trust to which English law applied.
26. It followed, Mr Croally argued, that the Commissioner erred in law in holding that French law was applicable to the arrangement for the purchase of the Property. It was accepted that the desire of Ms V to achieve a particular result under French succession law was the reason for her purchase of the Property in the Claimant's name: but that was only a "predominant background" fact, which did not mean that an implied trust, which arose from the relationship and understanding between persons domiciled and resident in England, had a close connection with France. There was a real difference between the purpose behind the purchase in the Claimant's name, which related to French succession law, and the purpose of preserving Ms V's beneficial interest in the Property during her lifetime. French law was irrelevant to the relationship between the Claimant and Ms V and to the protection that an implied trust would give to her beneficial interest in the Property until it was inherited by Steve. French succession law would only become relevant when the Claimant died. Only then would the issue of succession to the Property under French law arise. Adopting language from the judgment of Peter Gibson LJ in Lightning, until the death of the Claimant no event governed by French law would occur whereby any equity arising under the implied trust in favour of Ms V would be destroyed under English law.

Conclusions on applicable law

27. I start with a statement of the obvious: there was no express trust of the Property and there was no express choice of law for the arrangement made by the Claimant and Ms V.
28. The Claimant's case on applicable law rests entirely on an implied trust, which does not exist under French law, but is capable of existing under English law. Such a trust may be established under English law by ascertaining the relevant intentions of the parties from all the surrounding circumstances, such as the payment of the purchase price and the purpose for which the property was acquired: see, for example, Gissing v. Gissing [1971] AC 886. The Commissioner correctly identified the critical question as what system of law, English law or French law, was applicable to the case. In my judgement, he made no legal error in holding that French law was the applicable law.
29. First, the common law principles. The Commissioner rightly rejected Mr Croally's reliance on Webb and Lightning as determining the applicable law issue. Those cases are clear authority binding on this court for the proposition that, at common law, even if the subject matter is foreign immovable property, English law may be the law applicable to the question whether there is an implied trust of that property. However, on the particular facts of those cases, it was plain that English law was the law applicable to the relationship between the people concerned and their property arrangements. Thus in Lightning, in which English law and the law of implied trusts were held to apply to the purchase of land in Scotland, the facts were that, apart from the provision of money for the purchase of property in Scotland, there was nothing to connect Scottish law with the parties concerned, their relationship or their arrangements. English law was obviously the law with which the putative trust was most closely connected. Similarly in Webb the only connecting factor with French law was the situs of the property purchased.
30. I agree with Mr James Maurici appearing for the Secretary of State that in this case the Commissioner was entitled, on the facts found by him and on a proper understanding of common law principles, to conclude French law was the applicable law, as France was the country with which the parties' arrangements had the closest connection.
31. The whole focus of the admitted common intentions of the parties was on the provisions of French succession law. The agreed reason for, and the sole purpose of, the arrangement putting the Property into the Claimant's name was to produce a certain effect under French succession law. The desired legal result that, on the Claimant's death, the Property would be inherited by Steve, (and not by Ms V's 4 adult children, who would inherit if the Property were registered in her name at her death), could only be produced by registering the Property in the name of the Claimant. There was no suggestion in the evidence or in the argument that, but for the rules of French succession law, the parties would ever have arranged for the Property to be in the Claimant's name.
32. I reject the contention that English law is the applicable law because there was a common implied intention to obtain trust protection for and preservation of Ms V's beneficial interest under English law until that implied trust came to an end on Steve inheriting the Property under French law. In my view, the French succession purpose for putting the Property into the name of the Claimant was the dominating presence from the start and permeated the arrangement. It cannot sensibly be detached from the putative implied trust, and either postponed in its effect, or downgraded from its position as the defining feature of the arrangement.
33. Mr Croally's analysis subordinates French succession law to a background role, a mere contextual element in the transaction. That is an inaccurate and incomplete picture of what was really going on. The protection of Ms V's investment of money in the Property was only an incidental factor arising from the decision to put the Property into the Claimant's name. As I have explained the sole reason for that decision was that it was the only way of achieving the desired succession consequences under French law. It is true that the arrangement covered the eventuality of a sale of the Property by the Claimant (i.e. consent and destination of proceeds) and of the Claimant dying before Ms V (i.e. the French will). However, neither are factors favouring English law as the applicable law. They are consistent with achieving the Claimant's and Ms V's overarching ultimate purpose of inheritance by Steve and with attempting to prevent the Claimant from defeating that purpose by selling the Property and pocketing the proceeds before Steve inherited.
34. In brief, the Commissioner was entitled to conclude that the English aspects of the arrangement- the English domicile, residence and relationship between the parties to the arrangement, and an English law of implied trusts capable of operating on foreign property- were outweighed by the controlling factor of the French succession purpose of the arrangement, as evidenced by the admitted common intention of the parties. In arriving at his decision the Commissioner applied the correct legal principles, and did not err in law by leaving any relevant factors out of account or by taking any irrelevant factors into account. It certainly cannot be said that the result is perverse or plainly wrong.
35. The same result would follow from the application of Article 7 of the Hague Convention and the 1987 Act to ascertain the system of law with which the arrangement had the closest connection.
36. In those circumstances there is no need to consider what would be the position about the terms of an implied trust of the Property, if English law were applicable. The Commissioner touched on the topic obiter. In these choppy waters I prefer to steer well clear of unnecessary hazards, unless there is a special reason for risking them. That is not the case here.

French law point: renewed application for permission

37. The Commissioner rejected the secondary argument that, even if French law was the applicable law, it was wrong to treat the Property as the Claimant's capital. Jacob LJ refused permission for a second appeal on that point.

On an application for permission for a second appeal an important point of principle or practice, or some other compelling reason must be shown. It is not enough, for instance, simply to seek to challenge the correctness of the Commissioner's findings on the evidence of French law available to him. There was no shortage of evidence of French law. The Secretary of State obtained an opinion from Mr KJ Croft. His evidence was that under French law there was no trust; that the Claimant was the full legal and beneficial owner of the Property; and the Claimant could sell the Property without the consent of Ms V. The Secretary of State had also obtained expert evidence from Ms Dawn Alderson, it not being possible to instruct Mr Croft. She was asked to consider the remedies available in French law to Ms V in the event of the Claimant seeking to sell the Property and to treat the proceeds as his own. Her evidence in her opinion dated February 2008 was that, if France had jurisdiction (which was unlikely, in her view), a number of causes of action might be employed by Ms V all of which are based on rights in personam. Ms V would not have the right to claim a beneficial interest in the Property under a resulting or constructive trust. The registered owner would be considered as the absolute beneficial owner and a person who contributed to the price would not have ownership rights or an interest in the property. Ms V might have a right of action to claim compensation for the loss and to be associated with any benefit which the Claimant has received.

38. The Commissioner rejected the notion that the Secretary of State should obtain a 3^rd opinion on French law to resolve the uncertainty of remedies available on the key issue (i.e.the extent to which French law would allow the Claimant to dispose of the Property and deal with the proceeds as he saw fit without reference to Ms V) before a finding of French law was made by him.
39. The important point of practice or principle relied on by Mr Croally on the renewed application for permission was that the Commissioner wrongly placed on the Claimant the burden of proving French law. As a result he wrongly gave the Secretary of State the benefit of the doubt of unsatisfactory evidence contrary to the basic principles laid down by the House of Lords in Kerr v.. Department of Social Security [2004] 1 WLR 1372 at paragraph 16 on p1377F-H and paragraphs 62 and 63 on p1390 F-H. The Claimant had done his bit by providing evidence of the information within his knowledge about the acquisition of the Property, but the Secretary of State had not done all that could reasonably be expected of him within the guidance in Kerr in respect of Commissioner asking the relevant questions of the experts on French law. The Commissioner's proper course on the uncertain state of the evidence on French law was to have required the Secretary of State to obtain more evidence of French law on the relevant questions in order to clear up the uncertainties in it. The Commissioner's failure to do so was an error of law on his part.
40. Mr Croally explained that the key point was whether under French law the Claimant could treat the Property as his own capital, notwithstanding the arrangement with Ms V, which was found not to be a gift to him. Even though French law does not recognise an implied trust of the Property, it was relevant to consider whether the Claimant would be under a substantive obligation to Ms V to disgorge the benefit which he had received from her and whether an English court would regard that as having the remedial effect of a constructive trust, which would prevent the Property from being his capital, rather than just regarding French law as providing her with only a monetary remedy: see Dicey & Morris (14^th ed) 34-049.
41. In my judgment, no important point of principle or practice arises which would justify the grant of permission for a second appeal. The proper approach to social security claims was settled in Kerr and was followed in this case. It is, in general, unnecessary in social security adjudication of a co-operative, fact-gathering, inquisitorial character to resort to the formal burden of proof in arriving at a decision on a claim. The position here was that, on the French law point, the Commissioner had the benefit of two expert opinions at the expense of the Secretary of State. There were no matters of French law on which more expert evidence was required. The Commissioner was able to make a properly informed decision on French law. The decision made by him in the light of the expert evidence of French law was one open to him on the evidence. It cannot possibly be said to be perverse or plainly wrong.
42. The Commissioner found that the opinion of Ms Alderson was in cautious terms, but having considered it carefully, he was satisfied that it addressed the necessary questions on which he was able to reach conclusions about the causes of action and remedies (if any) of Ms V under French law if, without her consent, the Claimant were to seek to sell the Property and retain the proceeds. Such causes of action and remedies as might be available under French law were personal only and did not give her any proprietary interest in the Property.

Result

43. I would dismiss the appeal. There was no error of law in the Commissioner's decision that French law was the applicable law.
44. I would refuse permission to appeal from the findings on French law. No important point of principle or practice arises and there is no other compelling reason for granting permission for a second appeal.

Lady Justice Arden:

45. I agree.

Lord Justice Elias:

46. I also agree.