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Ellis v. Chief Adjudication Officer [1997] UKSSCSC CIS_69_1994 (08 May 1997)

R(IS) 5/98

(Ellis v. Chief Adjudication Officer)

Mr. D. G. Rice CIS/69/1994

CA (Staughton, Otton and Schiemann LJJ)

Capital - gift of mortgaged property by claimant subject to a condition subsequent that was not fulfilled - whether claimant still possessing capital in excess of £6,000 limit

The claimant transferred ownership of her flat to her daughter on deed of gift subject to the conditions that she repaid the mortgage and allowed the claimant to reside in the flat under her care. The mortgage was repaid but the claimant's daughter evicted the claimant from the flat, which she then sold. A tribunal upheld the decision of the adjudication officer that the claimant was not entitled to income support. The Commissioner set aside the tribunal's decision as in the absence of documentation (which had been lost or destroyed) explaining how the tribunal reached their decision it was impossible to examine the adequacy of their reasons. However, the Commissioner held that the claimant was not entitled to income support on the ground that her capital exceeded the sum specified in regulation 45 of the Income Support (General) Regulations 1987 (£6,000). His reasoning was that the gift had failed because one of the conditions had not been fulfilled and that the claimant was accordingly beneficially entitled to part of the proceeds of sale of the flat. The amount to which she was entitled was the value of the property less the mortgage repaid together with interest and the expenses of recovering the money from the daughter and, on the evidence, that exceeded £6,000. The claimant appealed against the Commissioner's decision on the grounds that there had been a contract, rather than a gift subject to conditions, or, alternatively, that the condition of caring for the claimant was void for uncertainty.

Held, dismissing the appeal, that:

on the evidence, the Commissioner was entitled to find there had been a gift;

on the true construction of the deed the condition requiring the daughter to look after the claimant was of sufficient certainty to be a valid and effective condition;

the daughter was in breach of that condition and as a result the gift failed and the beneficial interest in the property reverted to the claimant, with the consequence that the claimant had an interest in a capital asset;

the Commissioner was entitled to conclude that the value of that interest exceeded the statutory maximum of £6,000 as it was not necessary in the circumstances to define the value of the interest with absolute precision.

DECISION OF THE SOCIAL SECURITY COMMISSIONER

My decision is that the decision of the social security appeal tribunal given on 10 May 1990 is erroneous in point of law and accordingly I set it aside. As I consider it expedient to make fresh findings of fact and to give such decision as I consider appropriate in the light of them, I further decide that the claimant is not entitled to income support as from 26 September 1989.

This is an appeal by the claimant, brought out of time with the leave of a Commissioner, against the decision of the social security appeal tribunal of
10 May 1990. In view of the extraordinary length of time that has elapsed since the decision under appeal was given, and the absence of contemporary documentation, I directed an oral hearing. At that hearing the claimant, who was not present, was represented by Mr. A. Platt from the Bulwell Advice and Information Centre, whilst the adjudication officer appeared by Mrs. S. Rabash of the Solicitor's Office of the Department of Social Security.

Owing to the inordinate length of time for this appeal to be brought, it is not surprising that much of the contemporary documentation has long ago been destroyed. It is extremely difficult, then, to piece together the history of the matter with any certainty. It would seem that in February 1989 the claimant, who was then in receipt of income support, transferred her home to her daughter on the understanding that the latter would look after her and pay off the mortgage of some £6,000. At some time thereafter the adjudication officer disallowed income support. The terms of that decision are not known. However, it would appear to have been appealed to "the Nottingham appeal tribunal" who seemingly upheld the adjudication officer. There is nothing to suggest that their decision was ever challenged. Instead, the claimant appears to have made a fresh claim for income support on 26 September 1989. What seems to have sparked off this claim is the fact that at some unknown date prior thereto the claimant had been evicted from her home by her daughter and rehoused by the local authority "in a warden aided bungalow". The decision of the adjudication officer on this second claim has not been preserved, but clearly the claim was disallowed. For an appeal was made on 8 November 1989, and on
10 May 1990 the tribunal upheld the adjudication officer's decision.

The tribunal made the following findings of fact:

"1. The facts as set out in paragraphs 1 to 7 under the heading "summary of facts" in section 5 of form AT2 and in the various documents referred to therein are accepted.

Since her appeal the claimant is now living in a disabled person's flat and her income comprises retirement pension and attendance allowance."

The tribunal gave as the reasons for their decision the following:

"1. The tribunal had regard to the statutory provisions and Commissioners decisions referred to in sections 2 and 3 respectively of form AT2.

The adjudication officer presented his case on the basis that the only issue before the tribunal was as to whether, having regard to the decision of the previous tribunal that the claimant had dispossessed herself of her property for the purpose of securing income support, the notional capital arising therefrom had been reduced below the £6,000 limit and on that basis and having regard to the very low rate of income support to which the claimant would otherwise have been entitled, it was clear that the outstanding notional capital was still very much in excess of £6,000 so that the claimant had not yet reduced her capital to become entitled to benefit.

However, the tribunal gave further consideration as to the question arising from the disposal of the property but on all the evidence before them, and in particular having regard to the claimant's apparent knowledge of circumstances affecting income support entitlement, the tribunal saw no reason for arriving at a different conclusion from that of the Nottingham appeal tribunal."

Manifestly, to understand properly the findings and reasons for decision of the tribunal of 10 May 1990, it is necessary to have sight of the form AT2 and the various documents referred to therein, and to see the decision of the Nottingham appeal tribunal. However, all the relevant documents have long ago been destroyed. It would seem, however, that the issue before the Nottingham appeal tribunal was whether the claimant ceased to be entitled to income support by reason of her having deprived herself of the capital represented by her flat for the purposes of securing entitlement to income support, or, as in this case, continuance of entitlement to income support, within regulation 51(1) of the Income Support (General) Regulations 1987, SI 1987 No. 1987. I am not clear as to what turned on this issue because, if the claimant did deprive herself of her flat for the aforesaid purpose, the result would have been that she would have been deemed to be still in possession of the property, and as that property was her home, it was the subject matter of a disregard. I find it mystifying as to why the claimant was deprived of income support by the Nottingham appeal tribunal, as it would appear to me that whether or not she did dispossess herself of the flat for the purpose of ensuring continued entitlement to income support, nothing at that stage turned on it. She had done nothing to bring about disentitlement. However be that as it may, for this is not a matter before me, the tribunal of 10 May 1990 very properly considered the issue afresh. There was before them a claim from a different commencement date, and by then the claimant had been evicted, so that the flat was no longer a home, and there could be no question of a disregard on that account. It had become very much an issue as to whether or not the claimant was caught by regulation 51(1). (This assumes, of course, that the claimant had divested herself of her beneficial interest in the property, something which is considered and rejected later in this decision.) The tribunal were satisfied that the claimant had deprived herself of the property for the purposes of continuing to be entitled to income support. Unfortunately, the tribunal have not explained why they reached that conclusion, and Mr. Platt contends that I should set aside the tribunal's decision for breach of regulation 25(2)(b) of the Adjudication Regulations. The difficulty, of course, is that in the absence of the relevant documentation it is impossible properly to evaluate the adequacy of the tribunal's reasoning. It might well have been perfectly clear, in the light of that documentation, why the tribunal reached the conclusion they did. However, to ensure that the claimant has no cause for grievance, I will, albeit with some hesitation, set aside the tribunal's decision as being in breach of regulation 25(2)(b) of the Adjudication Regulations.

Mr. Platt urged me not to remit the matter to a new tribunal for rehearing, but to determine the appeal myself. He pointed out that the claimant's physical condition was such that she would be unable to attend a rehearing, and in view of the present animosity prevailing between her and her daughter, it was unlikely that the daughter could be prevailed upon to attend. Moreover, it was doubtful whether any further evidence of any significance would emerge over and above that recorded in the chairman's note of evidence and that which he was himself able to recite to me. Mrs. Rabash did not dissent from this approach. Nearly five years have elapsed since the decision of the tribunal, and I consider that this matter should be disposed of as quickly as possible. Accordingly in the circumstances I will determine the appeal myself. I rely on the evidence before me, such as it is, together with certain additional statements made by Mr. Platt from his investigations of the circumstances of this case.

What is clear from the chairman's note of evidence, as supplemented by Mr. Platt's recital of the arrangement made between the claimant and her daughter (as he had ascertained the position from his enquiries), was that the transfer of the property was not an outright gift by the claimant to her daughter of her home without strings. She imposed two conditions, namely (1) that her daughter would look after her in the flat and (2) that she would pay off the mortgage of some £6,000. The second condition was complied with, but manifestly not the first. For, in the event, the daughter evicted the claimant, and the latter had to be rehoused as a homeless person. Accordingly, in my judgment, this was a case of a gift subject to a condition subsequent, namely that donee would look after the donor in the flat. That condition was unfulfilled, and then consequently the gift failed. The law on this point is succinctly stated in Halsbury's Laws of England 4th Edition, Volume 20, paragraph 50:

"Gifts may be made subject to conditions either precedent or subsequent. A condition precedent is one to be performed before the gift takes effect. A condition subsequent is one to be performed after the gift has taken effect, and, if the condition is unfulfilled, will put an end to the gift."

Accordingly, in my judgment, when the subsequent condition failed, namely when the claimant was evicted, the gift came to an end, and the daughter held the property on trust for the claimant.

Mr. Platt informed me that the title deeds conveying the property to the daughter gave no indication of any condition, but were in a form consonant with an unqualified gift. However, I do not think that really materially affects the issue. If there was a condition, there was a condition, and the fact that it was not referred to in the transfer deed cannot affect this issue. Mr. Platt also pointed out that, after the claimant had been evicted, she had endeavoured to regain her property and had taken legal advice. She had in the event been told that she would not succeed, and as a result had withdrawn a "caution" registered against the property. Mr. Platt suggested that I should treat the transaction as an outright gift. However, in the light of the evidence, I can do no such thing. There clearly was a condition imposed. I do not know what information was put to the claimant's legal advisors nor do I know whether Counsel's opinion was taken nor whether the question of a condition and its effect was properly considered. I can only look at the facts as they appear to me and make legal inferences therefrom. But at least the attempt by she claimant to recover her property supports the view that she never meant there to be an outright gift; she meant the gift to be subject to the condition that she be looked after in the flat.

Accordingly, I am satisfied that, as at the date of the second claim, the claimant had the beneficial interest in the property. I now have to decide whether that value exceeded the statutory maximum of £6,000. A letter from the Nottinghamshire County Council dated 5 October 1993 states that the estimated value of the house was £35,000. In the absence of any other evidence, I will accept that as correct. Certainly, neither Mr. Platt nor Mrs. Rabash sought to persuade me otherwise. There must be deducted from this, 10% for the expenses of sale, pursuant to regulation 49(a)(i), but how is the mortgage which was repaid by the claimant's daughter to be treated? Is it an incumbrance secured on the property to be deducted pursuant to regulation 49(a)(ii)? The daughter paid off the mortgage, but I do not know exactly at what stage. If she discharged it prior to her taking a transfer of the property, then it would appear that there was a statutory transfer of the mortgage to her (see section 115(2) of the Law of Property Act 1925) and the mortgage remained secured on the property, with the result that it was deductible. But if the daughter discharged the mortgage after she had taken the transfer, it would seem that, as on the face of it she appeared "entitled to the immediate equity of redemption" there could be no statutory transfer. However, I consider that nothing will turn on this in practice. For the daughter would be subrogated to the rights of the mortgagee in accordance with normal equitable principles. The property would still be subject to the incumbrance of a mortgage. The law is conveniently summarised in paragraph 508 of Volume 28 of Halsbury's Laws of England in footnote 6, which reads so far as is relevant as follows:

"The ordinary and typical example of subrogation is that 'where A's money is used to pay off the claim of B, who is a secured creditor, A is entitled to be regarded in equity as having had an assignment to him of B's rights as a secured creditor': Burston Finance Ltd v. Speir Way Ltd [1974] 3 All ER 735 at 738 [1974] 1 WLR 1648 at 1652, per Walton J. This is similar to the statutory transfer of a mortgage where the receipt for mortgage money indicates that payment has been made by some person not immediately entitled to the equity of redemption: see the Law of Property Act 1925, s. 115(2) ... See also Ghana Commercial Bank v. Chandiram [1960] AC 732 at 745, [1960] 2 All ER 865 at 871, PC, per Jenkins LJ: 'it is not open to doubt that where a third party pays off a mortgage he is presumed, unless the contrary appears, to intend that the mortgage shall be kept alive for his own benefit'; see also Butler v. Rice [1910] 2 Ch 277; Chetwynd v. Allen [1899] 1 Ch 353."

Accordingly, there has to be deducted from the value of the property the mortgage repaid together with interest due thereon from time to time.

However I do not think that this concludes the extent of the deductions. I think I should also make a deduction in respect of any costs likely to be incurred by the claimant in obtaining possession of the property, and not recovered from the daughter. Normally, where someone holds property on trust for another, the latter can simply call for its transfer, and the costs involved are de minimis but if, as would appear to be the case here, there is animosity between the parties, and the transfer is likely to be resisted, the possibility has to be envisaged of some court proceedings involving costs, and the possibility that not all of those costs will necessarily be recovered. This must affect the market value of the property. I have no idea as to the daughter's means or her capacity or willingness to pay costs. But even allowing for this further deduction, I am satisfied that, as at the date of the second claim for income support, the claimant still had assets substantially in excess of £6,000. No costs reasonably envisaged could possibly reduce the net value, after deduction from £35,000 of the 10% for the expenses of sale, and the repayment of the mortgage (together with any accrued interest), below the capital limit of £6,000. It follows from what has been said that as at 26 September 1989 the claimant had actual capital in excess of the statutory maximum, and was not entitled to income support. Moreover, there is no evidence before me to suggest that the claimants capital has at any time from 26 September 1989 to the date of my decision fallen below the relevant statutory limit (currently £8,000), so that the claimant has throughout continued to be disentitled to benefit.

My decision is set out in paragraph 1.

Date: 21 March 1995 (signed) Mr. D. G. Rice

Commissioner

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

DECISION OF THE COURT OF APPEAL

Miss L. Findlay (instructed by Barne Ward & Julian Griffiths, Nottingham NG1 5HS) appeared on behalf of the Appellant.

Mr. T. Mould (instructed by the Solicitor for the Department of Social Security, London WC2A 2LS) appeared on behalf of the Respondent.

LORD JUSTICE STAUGHTON: Mrs. Ellis is now 70. She appeals by leave of a single Lord Justice from the decision of a social security Commissioner about income support.

The legislation

Section 134(1) of the Social Security Contributions and Benefits Act 1992, replacing earlier legislation to the same effect, provides:

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

Regulation 45 of the Income Support (General) Regulations 1987 as amended in 1990, provides that the prescribed amount is £8000. Previously it was £6000.

Also relevant are regulation 49:

"Capital which a claimant possesses in the United Kingdom shall be calculated-

(a) except in a case to which sub-paragraph (b) applies, at its current market or surrender value, less-

(i) where there would be expenses attributable to sale, 10 per cent.;

(ii) the amount of any incumbrance secured on it."

and regulation 51(1):

"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 ..."

The facts

Mrs. Ellis owned either a flat or a house at 58 Ridgway Walk, Nottingham. She had bought it from the Council, with the help of a mortgage of £6000.

At some time in January 1989 three things happened:

(1) Mrs. Ellis transferred the flat (as I shall call it) to her daughter by a document described as a deed of gift; she imposed two conditions, as the social security Commissioner found, in these terms: (i) that her daughter would look after her in the flat, and (ii) that the daughter would pay off the mortgage of some £6000.

(2) The daughter did pay off the mortgage.

(3) The daughter was registered as owner of the property.

At some time between 20 June and 26 September 1989 Mrs. Ellis was evicted from the flat by her daughter. She was then rehoused by the local authority in a warden-aided bungalow. By May 1990 she was living in a disabled person's flat, and her income comprised retirement pension and attendance allowance.

The proceedings

These fall into two groups.

The first claim for income support was made while Mrs. Ellis was still living in the bungalow, and rejected by an adjudication officer. An appeal by Mrs. Ellis was rejected by the Nottingham appeal tribunal on 20 June 1989, and there has been no further appeal from that decision.

It seems likely that the decision was based on regulation 51, and a finding that Mrs. Ellis had deprived herself of the flat for the purpose of securing entitlement to income support. If that was the basis of the decision, it was questionable. Apparently the flat would, under Schedule 10 of the regulations, have been disregarded for the purpose of calculating Mrs. Ellis's capital while she was living in it. So her chances of obtaining income support would not have been in any way improved if she gave the flat to her daughter. I suppose that it may nevertheless have been the fact that mistakenly she deprived herself of it "for the purpose of securing entitlement to income support", even if that purpose would not in law be achieved. But it would be a hardhearted tribunal which made such a finding against her.

Another possibility is that the purpose in January 1989, shared between Mrs. Ellis and her daughter, was that she would transfer the flat and within a few months be evicted, leading then to a claim for income support. There is no finding to that effect, nor evidence of such a scheme so far as I am aware. But I do not doubt that somebody somewhere may have thought of it.

All those matters are history, and not directly relevant to the present problem.

The second group of proceedings starts on 26 September 1989, when a fresh claim for income support was made by Mrs. Ellis and rejected by an adjudication officer. There was an appeal to the Derby appeal tribunal, which was dismissed on 10 May 1990.

By that time Mrs. Ellis was no longer living in the flat. It would seem that the Derby appeal tribunal again found that Mrs. Ellis had deprived herself of the flat for the purpose of continuing to be entitled to income support. That again was a questionable decision, since the depriving had happened at a time when she was still living in the flat. But the decision might, on appropriate evidence, have been justified on one or other of the two ways that I have suggested in relation to the Nottingham decision.

There was then, five years later, an appeal from the Derby decision to a social security Commissioner. He gave his decision on 21 March 1995. He held that the reasoning of the Derby appeal tribunal was inadequate to explain how they reached their conclusion, or more precisely that it was "impossible properly to evaluate the adequacy of the tribunal's reasoning." So he set aside the decision. But with the support or acquiescence of both parties he went on to decide the claim for himself.

The Commissioner's reasoning was that the claim for income support failed on a new ground. He put it concisely and clearly as follows:

"7. What is clear from the chairman's note of evidence, as supplemented by Mr. Platt's recital of the arrangement made between the claimant and her daughter (as he had ascertained the position from his enquiries), was that the transfer of the property was not an outright gift by the claimant to her daughter of her home without strings. She imposed two conditions, namely (1) that her daughter would look after her in the flat and (2) that she would pay off the mortgage of some £6,000. The second condition was complied with, but manifestly not the first. For, in the event, the daughter evicted the claimant, and the latter had to be rehoused as a homeless person. Accordingly, in my judgment, this was a case of a gift subject to a condition subsequent, namely that donee would look after the donor in the flat. That condition was unfulfilled, and then consequently the gift failed. The law on this point is succinctly stated in Halsbury's Laws of England 4th Edition, Volume 20, paragraph 50:

"Gifts may be made subject to conditions either precedent or subsequent. A condition precedent is one to be performed before the gift takes effect. A condition subsequent is one to be performed after the gift has taken effect, and, if the condition is unfulfilled, will put an end to the gift."

Accordingly, in my judgment, when the subsequent condition failed, namely when the claimant was evicted, the gift came to an end, and the daughter held the property on trust for the claimant."

There was a second question which the Commissioner had to decide, as to the value of Mrs. Ellis's capital asset and whether it exceeded £6000. I shall return to that later.

Three points have been argued on this appeal.

(1) Was there a gift?

Miss Findlay for Mrs. Ellis argues that the transfer of the flat was not a gift; it was a transfer for valuable consideration in the shape of a promise to redeem the mortgage, if not also a promise to care for Mrs. Ellis in the flat. True the promise to redeem can scarcely have been adequate consideration, since it merely removed the encumbrance which was attached to the gift. The notion that redemption also relieved Mrs. Ellis of a personal liability, while accurate in law, had little to do with reality. But adequacy is not an essential requirement of consideration.

If I had been the judge of fact in this case, I would have been disposed to agree with the Commissioner that there was no contract in this case, but instead a gratuitous transfer with two conditions attached. It is well established law that there can be no contract without an intention to create legal relations, and that domestic agreements in a family often lack that characteristic: see Chitty on Contracts (27th edn) paras. 2.105 and 2.110. If I had been the judge of fact, I would have found that there was no intention in the present case that the daughter's promises to look after her mother and to pay off the mortgage would be contractually binding. But there is no appeal on fact from the Commissioner, and I need not go that far. It is enough that he found the transaction to be a gift subject to conditions, rather than a contract. That conclusion to my mind reflected reality.

(2) Was the condition too uncertain?

We were referred to the case of Clavering v. Ellison [1859] 7 HL cas. 707. There the question was whether there could be a condition to defeat a vested estate if children were not educated in England, in the Protestant religion, according to the rites of the Church of England. Lord Cranworth said (at p. 725):

"I consider that, from the earliest times, one of the cardinal rules on the subject has been this: that where a vested estate is to be defeated by a condition on a contingency that is to happen afterwards, that condition must be such that the Court can see from the beginning, precisely and distinctly, upon the happening of what event it was that the preceding vested estate was to determine."

We were referred by Mr. Mould, for the Chief Adjudication Officer, to the case of Clayton v. Ramsden [1943] AC 320, where the condition was that the legatee should not marry a person "not of Jewish parentage and of the Jewish faith." This was held to be void for uncertainty. Lord Russell of Killowen said (at p.326):

"The courts have always insisted that conditions of defeasance, in order to be valid, should be so framed that the persons affected (or the court if they seek its guidance) can from the outset know with certainty the exact event on the happening of which their interests are to be divested."

On the other hand in Blathwayt v. Cawley [1976] AC 397 it was held that a condition to take effect if the tenant for life "be or become a Roman Catholic" was not void for uncertainty. Lord Wilberforce (at p. 425) referred to

"the right, which I conceive judges have, to judge the degree of certainty with some measure of common sense and knowledge and without excessive astuteness to discover ambiguities."

In Fawcett Properties Ltd v. Buckingham County Council [1961] AC 636 at p. 678 Lord Denning said:

"A planning condition is only void for uncertainty if it can be given no meaning or no sensible or ascertainable meaning, and not merely because it is ambiguous or leads to absurd results. It is the daily task of the courts to resolve ambiguities of language and to choose between them; and to construe words so as to avoid absurdities or to put up with them. All this applies to conditions in planning permissions as well as to other documents ... The courts, I am sure, could say whether the case came within the condition or not. They would not have to give up the task in despair."

In this case we are concerned with Mrs. Ellis's claim to have income support. If the condition which she laid down to her daughter is void for uncertainty, it will promote her claim. But it will also follow that she cannot recover her flat from her daughter, or rather the proceeds of sale since the flat has now been sold. The wider implications of such a decision cause me great concern. There must be many elderly parents who part with property to their children in the faith of assurances such as that given to Mrs. Ellis. Is the law to say that unless they make a contract to that effect, and unless the term is at least sufficiently certain to qualify as a term of a contract, they can do nothing to protect their interest?

In my judgment the condition can fairly be construed as requiring the daughter (i) to allow Mrs. Ellis to live in the flat for so long as it is reasonably practicable for her to do so, and (ii) to see that she is provided, for payment if required, with the basic necessities of life. I would hold that such a term has sufficient certainty to ensure that it is valid and not ineffective.

(3) What was the value of the flat?

We need not take account of the fact that, at some time between 1990 and 1995 and while the appeal was pending, the flat was sold by the daughter. That was not known to the Commissioner, and had not happened at the date as at which value had to be ascertained.

The Commissioner found that the market value of the flat was £35,000; that 10 per cent should be deducted for the expenses of sale, in accordance with regulation 49, and that £6,000 should be deducted for the mortgage which the daughter had paid off, since she would be subrogated to the rights of the mortgagee. Thus far there has been no dispute before us. But what of the cost of realising Mrs. Ellis's claimed beneficial interest?

There was a dispute as to what regulation 49 requires to be valued. Is it the flat, or the beneficial interest in the flat in the hands of Mrs. Ellis? If the latter view is correct, it is said that we have to envisage Mrs. Ellis going to an estate agent and offering her, presumably disputed, beneficial interest for sale. Would anyone buy it at all, or for at least £6,000?

For my part I doubt if so complicated a calculation is required by the regulation. It may be necessary to embark on that road in the case of limited interests or joint ownership, as is illustrated by the case of Chief Adjudication Officer v. Dowell and Others, 8 February 1995, unreported [now reported as R(IS) 26/95]. But I would not have thought it right to apply that treatment to a case where the claimant has a good title to the whole of the asset but there may be some resistance to the realisation of it. In those circumstances the right course is to make some deduction for the costs likely to be incurred in realising the asset. That was what the Commissioner did in this case. He concluded that there would in any event remain more than £6,000, which was the relevant capital limit under regulation 45 at the time. That was a conclusion of fact with which we cannot interfere.

I would dismiss this appeal.

LORD JUSTICE OTTON: I have read the draft judgment of Staughton LJ and on the three issues :

I agree that there was evidence to support the findings that there was a gift of the flat by the appellant to her daughter and that it was subject to a condition subsequent which if unfulfilled would put an end to the gift. I am not persuaded that the Commissioner erred in failing to spell out a contract for the reasons given by Staughton LJ.

I am likewise reluctant to construe the condition so that it is void for uncertainty. Two consequences would follow from such a finding: (1) the appellant's claim for income support would be enhanced, but (2) the gift would be absolute; the daughter would have been entitled as from the date of the gift to evict her mother from her home, sell it and keep the net proceeds of sale. This result would fly in the face of the security and peace of mind which the appellant sought to achieve by this simple arrangement between mother and daughter. It would also discourage and undermine any similar arrangements in families when a parent places his or her trust for the future in a close relative. A fair meaning to attribute to the terms used would be for the donee to permit the parent to remain in the home for so long as they both agreed or it was reasonably practicable to do so. This would avoid ambiguity and permit some flexibility in the implementation of the arrangement. The parent might agree to be re-housed in accommodation more suitable for the parent's needs, or (as often happens) the parent might be reluctant to move even in the teeth of medical advice and the family's wishes for the person's wellbeing. In the latter case it could not be said that the offspring had acted unreasonably and nullified the gift in removing the parent to other more suitable accommodation.

On this analysis I have no difficulty in attributing the certainty to the conditions adumbrated by Staughton LJ. Moreover I consider that the Commissioner's finding that the daughter by her conduct breached the condition is unassailable. This put an end to the gift, and the property reverted to the mother and if sold she was entitled to the net proceeds of sale after deduction of any sum accruing to the daughter.

For the purposes of assessing entitlement to income support a claimant must either have no income or income which does not exceed "the applicable amount" as prescribed by the regulations. Similarly his capital, calculated in accordance with regulations, must not exceed a prescribed limited (£6,000 in the instant case).

In Chief Adjudication Officer and The Secretary of State for Social Security v. Dowell & Others (unreported) SSTRF/0178/B [now reported as R(IS) 26/95] this Court (Nourse, Hobhouse LJJ and Sir Ralph Gibson) considered five cases where the question was whether the claimant's capital exceeded the limit. All three judges discussed in depth the conceptual difficulties involved.

Hobhouse LJ at p.13D said:

"Against this statutory background it is very difficult for a court to approach any question of the construction of the regulations on the basis that there is any intention that the regulations shall have, in their application, a relationship to reality or any identifiable statutory policy of justice. There is, therefore, in my judgment no escape from adopting a construction of the regulations which derives little, if any, assistance from anything other than the literal meaning of the actual language used. The detailed policy of the regulations is in many respects obscure and equivocal. The arguments which have been addressed to this Court have not enabled me to discern any clear principle which guides the drafting of the two provisions in the regulations which have given rise to the dispute before us. However I have been prepared to assume that there is an overall intention that income support should be paid, and only paid, to those who have inadequate financial means to support themselves; that ease of administration of the scheme and the avoidance of complication are considerations which may have motivated those responsible for drafting the regulations and that the creation of artificial situations by means of deeming provisions has not been adopted as an end in itself."

I respectfully agree and approach the present problem mindful that the scheme, if it is to be implemented speedily and pragmatically, should be applied with a minimum of complication.

Accordingly, in such a situation as this, it is incumbent upon the officials concerned in accordance with regulation 49 to assess the capital which the claimant possesses at the time when the entitlement to benefit is determined (as opposed to when the gift was nullified) and to calculate the value of the interest in round terms on the basis of the information then available.

The editor's note to regulation 49 is illuminating:

"The general rule is that the market value of the asset is to be taken. The value at this stage does not take account of any incumbrances secured on the assets, since those come in under para (a)(ii) (CIS/255/1989). In R(SB) 57/83 and R(SB) 6/84 the test taken is the price that would be commanded between a willing buyer and a willing seller at a particular date. In R(SB) 6/84 it is stressed that in the case of a house it is vital to know the nature and extent of the interest being valued. Sometimes a detailed valuation is not necessary, such as where the value of an asset is on any basis clearly over the £8,000 limit (CSIS/40/1989)."

The difficulty is that the Commissioner did not identify or define the precise nature of the interest being valued. However, I do not consider it was necessary to explore in depth the law of real property in order to define the interest with absolute precision in order to reach a practical solution.

Once the Commissioner had decided that the gift was at an end the property (or the beneficial interest) reverted to the claimant subject to a deduction for the daughter's contribution to discharging the mortgage. In my view, by implication disregarded the fact that in a civil suit the daughter might have established a better claim. He was justified in proceeding on the basis of the County Council valuation of £35,000 in 1993, in making the statutory deductions and then concluding that the interest was worth more than £6,000 and without making a final and definitive valuation. I can find no error of principle. The conclusion was one of fact and was open to him on the evidence available.

It may be that when the claimant has pursued the daughter she will recover capital in excess of the prescribed limit, in which case no injustice will be done to her. On the other hand it may transpire that the net proceeds of sale are, for whatever reason, less than the limit in which event she will no doubt be entitled to make a fresh application for benefit.

I would dismiss the appeal.

LORD JUSTICE SCHIEMANN: I agree that this appeal should be dismissed.

Order: Appeal dismissed with costs. Leave to appeal refused.