UK Social Security and Child Support Commissioners' Decisions

 


CIS/213/2004

CIS/214/2004

DECISION OF THE SOCIAL SECURITY COMMISSIONER

Introduction

1. On 15 March 2000 completion of the purchase of a house and adjoining land in Poullaouen, France ("the Property") took place. The Property was purchased and registered in the name of the Claimant. However, the whole of the purchase price and of sums subsequently spent on renovating the Property (approximately £30,000 in total) was provided by a Ms V, who was living in the same house, in England, as the Claimant (although they were not living together as partners). Ms V raised the purchase money by borrowing it on the security of her house in England.
2. The Claimant and Ms V have a son, Steve, who was then aged 11. Ms V also has four adult children from another relationship. It is common ground that 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, Miss V wished to provide only for Steve, and under French succession law he would inherit on the Claimant's death.
3. On 15 March 2000 (i.e. the date on which the Property was transferred to him) the Claimant, on the advice of a French notaire, executed a holograph Will bequeathing a usufruct (roughly equivalent to a life interest) of the Property to Ms V. The combined effect of the Property being in the Claimant's name and of his Will was that on the Claimant's death Steve would inherit half the Property with Ms V having the usufruct of the remainder (see the opinion of Mr. Croft, referred to below, at p.375).
4. The Claimant had for many years been in receipt of income support on the ground that he was incapable of work. He had not disclosed to the Department any interest the Property.
5. On 6 August 2002 (the Department having become aware that title to the Property was vested in the Claimant) a decision was made superseding and removing the Claimant's income support entitlement with effect from 1 February 2000 (that being the date on which the decision maker considered that the Claimant had acquired the Property; it is common ground that the correct date was 15 March 2000). The decision was on the ground that the Claimant had an asset (namely the Property) with a value in excess of £8,000. Section 134(1) of the Social Security Contributions and Benefits Act 1992 provides that no person shall be entitled to an income-related benefit if his capital exceeds the prescribed amount (£8,000 at the time relevant to this appeal).
6. On 7 October 2002 a decision was made that overpayments of income support totalling £11,993.54 had been made in respect of the period from 1 February 2000 to 12 June 2002 and were recoverable from the Claimant on the ground that he had failed to disclose that he was entitled to the Property.
7. On 8 October 2003 an appeal tribunal dismissed the Claimant's appeals against those two decisions. The Claimant contended before the Tribunal that although he was registered as the owner of the Property, the beneficial owner of it was Ms V, not the Claimant. Commissioner case law has established that if the claimant is the legal owner but not the beneficial owner of an asset, i.e. because he is a mere trustee of it, that asset will not be treated as capital for the purposes of s.134 of the 1992 Act.
8. On 21 September 2004 Miss Commissioner Fellner allowed an appeal by the Claimant against the income support entitlement decision, but only to the extent of (a) substituting the date 15 March 2000 as the date from which the Claimant ceased to be entitled to income support and (b) finding that the Claimant requalified for income support from 3 May 2002 under the disregard in para. 26 of Schedule 10 to the Income Support (General) Regulations 1987 because from that date he was taking reasonable steps to sell the Property. On 21 September 2004 Miss Commissioner Fellner in effect dismissed the Claimant's appeal against the overpayment recoverability decision, but substituted the period from 15 March 2000 to 2 May 2002 as the period in respect of which there had been a recoverable overpayment.
9. Miss Fellner held that it was French law, as the lex situs, which governed ownership of the Property and that because (as is common ground) trusts are not recognised by French law there could be no resulting trust of the Property in favour of Ms. V. Miss Fellner further made important findings in relation to two documents.
10. The first was a document dated 1 February 2001 (albeit witnessed on 14 January 2001) and signed by the Claimant and Ms V ("the 2001 Agreement"). It begins by stating that Ms V "will purchase a property in Brittany France." It includes the following further provisions: (a) that the property will be registered in the Claimant's name but that he will not have "any shares or financial gain from the property"; (b) that the Property will be registered in the Claimant's name so that if the Claimant dies Steve will inherit; (c) that the Claimant will have no right to sell or borrow against the property; (d) that "[the Claimant] agrees that he is not the owner of the property but just the registered keeper of the property and that [Ms V] is the owner of the property this is to protect [Steve's] legal rights under the French Inheritance Laws."
11. The Tribunal had found that the 2001 Agreement "either relates to another property or is a fiction written up to try and defeat the capital and overpayment decision." Miss Commissioner Fellner found that "either this document relates to a different property [i.e. because it referred to the future] or it is without effect because entered into after the purchase of the [Property] was completed." The latter statement was clearly on the basis that French law governed its effect and that it could not operate as a "tontine" under French law because not incorporated in the purchase contract and it could not take effect as a declaration of trust because French law does not recognise trusts.
12. The second document was signed by the Claimant alone on 1 December 1999 ("the 1999 Agreement"). It contains provisions similar to those in the 2001 Agreement. Miss Fellner said in para. 7 of her decision relating to the entitlement appeal: "I do not believe this document to be other than a put-up job, and I cannot believe it would not have been produced sooner if it had existed earlier."
13. On 9 November 2005 the Court of Appeal, by a consent Order, allowed appeals by the Claimant against Miss Fellner's decisions on the ground that, in holding that French law governed the question whether there was a resulting trust in favour of Ms V, she failed to consider the provisions of the Hague Convention of 1986 on the law applicable to trusts and on their recognition, as implemented by the Recognition of Trusts Act 1987. By the Consent Order Miss Fellner's decisions were set aside and it was ordered that "the remaining issues (see the schedule hereto) be remitted to the Commissioner for determination." Paragraphs 19 to 22 of the schedule to the Order were as follows:

"19. In the light of the above matters it is agreed that the case should be remitted to the Commissioner.

20. The parties are agreed that the following issues remain to be resolved:

a. what, applying the provisions of the Hague Convention and the 1987 Act, is the applicable law governing the arrangement entered into between the Appellant and [Ms V] for the purchase of the Property

b. If English law is the applicable law whether the facts give rise to a presumed resulting trust or common intention constructive trust

c. if French law is the applicable law, it being a finding of fact that French law does not recognise trusts, whether the value of the French property should for some reason nonetheless not be treated as capital for the purposes of the [Social Security Contributions and Benefits Act 1992].

21. In agreeing this list of issues the parties do not purport to, and cannot, seek to limit the jurisdiction of the Commissioner on the remission.

22. To the extent that issue c above requires determination and there is a need for further evidence on French law the obtaining of such evidence shall be a matter left to the Commissioner to deal with by way of directions."

14. Sadly Miss Fellner has died since the Court of Appeal's decision, and the case was transferred to me. I held an oral hearing for the purpose of determining the remitted matters, at which the Claimant was represented by Mr Miles Croally of counsel and the Secretary of State by Mr James Maurici of counsel. I am most grateful to them for their written and oral submissions.

The basis on which the Property became vested in the Claimant

15. I agree with Mr Croally that it is first necessary to determine the facts as to the basis on which the Property became vested in the Claimant, because they are potentially relevant to all three of the issues specified in paragraph 20 of the Schedule to the Court of Appeal's Order.
16. In Ms V's witness statement, signed on 22 February 2007 (i.e. after the Court of Appeal's Order) it is asserted as follows:

"I, with [the Claimant's] agreement, decided to purchase the property in [the Claimant's] name. This would mean that my property would indirectly pass to Steve if I died. [The Claimant] agreed that he would have no form of interest in the property, and would not be expected to make any contributions in respect of it. [The Claimant] would merely be the registered keeper. This was never a gift, nor was it a loan to [the Claimant]. [The Claimant] agreed to this arrangement, for which I am grateful to him, which now meant that my property would be dealt with in the manner that I wished in the event of my death. I am also aware that [the Claimant] drew up a French Will in order to protect my interests. I am led to believe that [the Claimant] was advised by the French notaire that conducted my purchase, to draw up this Will, so that although the Property would be in [the Claimant's] name, I would be entitled to the property."

17. It is further asserted in Ms V's witness statement that "in order to protect my interests further" Ms V and the Claimant drafted the 1999 Agreement. It is further stated that after the Property had been purchased a friend who was on holiday with Ms V and the Claimant over Christmas 2000, and who is a Macedonian lawyer, said that he felt that the 1999 Agreement needed to "be re-done", as it lacked Ms V's signature and was not witnessed. The 2001 Agreement was therefore drawn up and signed by both Ms V and the Claimant, and witnessed. Ms V further states that she wrote on the back of the 2001 Agreement the words "to be read in conjunction with the agreement between myself and [the Claimant] dated December 1999."
18. It is helpful, in making findings as to the basis on which the Property was purchased in the Claimant's name, to trace the chronology of what was asserted by the Claimant and Ms V after the Department discovered that the Claimant had an interest or possible interest in the Property.
19. The Claimant was interviewed by an officer of the Department on 16 April 2002. He stated that he did not own any property in France and that the property there belonged to Ms V. (Pages 232-243).
20. On 17 April 2002 the Department wrote to Ms V stating that it had been alleged that the Claimant owned property in France, and requesting her to provide evidence of the addresses and ownership of the properties. (Page 54).
21. The Claimant was interviewed again by an officer of the Department on 11 July 2002 (an agreed transcript begins at p.243, but has a considerable number of gaps where what was said is inaudible, owing to the fact that the recording was an unauthorised one made by the Claimant). The Claimant stated that although the property was in his name he was not the owner of it, and that it had been put in his name, rather than that of Ms V, in order to prevent Ms V's adult children becoming entitled to it on Ms V's death. When asked how he could prove that he didn't buy the property he said (pp.247-8):

"I can prove to you, the only way I can prove to you is for [Ms V], which I did say -would go to appeal and to produce evidence in the appeal, [Ms V] solely sent the money, [Ms V] borrowed the money to buy the properties for a start off, so she had the evidence to show she'd borrowed the money, she had the evidence to show that she's sent the money out to France, so it's no money is there to me, so it's solely all her money. …………….It's because, it it's putting a name against one of her properties, I can't sell the property because it's in French, I can't pronounce the word properly, it's called a Toutine or something, and it's a thing which is signed in against it saying that [Ns V], if anything happens to me [Ms V] has the use of all her properties, she can't own the property, because it has got to go to the children of the person who died."

Later in the interview (p.255) he was asked to produce documents showing that the properties in France (it was at that stage considered that there might be more than one) were not his, and he said:

"Well those documents that you're asking for, the Toutine and all that, that is with a notaire, so that means I'd have to get to France somehow to get that, or write to them and ask them for it."

The Claimant made no mention in the interview of either the 1999 or the 2001 Agreement.

22. On 26 July 2002 Ms V wrote to the Department (p.67) giving the following explanation:

"Under the French law if the property was registered in my name ….. all children borne by me from any previous marriage or relationships which I have 4 would all inherit an equal share to any property on my death, as I did not wish my previous children to gain from this but did not wish to disinherit my son Steve and after taking advice the legal way round this was for the property to be registered in [the Claimant's] name as [the Claimant] is the father of Steve and a tontine clause inserted to protect my rights and I enclose a copy of French law which should explain what [the Claimant] was trying to explain to you or alternatively I could suggest that you could speak to a lawyer that deals with French property laws who would substantiate what I have just said."

23. Following the Claimant's appeal in early September 2002, the Department stated in its written submission in the appeal that there was insufficient evidence that the Claimant was not the beneficial owner. In response to the Department's submission the Claimant appears to have supplied a schedule of evidence (pp86-108), which did not contain a copy of or refer to either the 1999 or the 2001 Agreement.
24. On 12 February 2003 the Appeals Service received a further submission and evidence from the Claimant (pp.110 – 129), which did not refer directly to either the 1999 or the 2001 Agreement, although it did (p.124) refer to an "affidavit" of Ms V (presumably the statutory declaration referred to below).
25. On 19 February 2003 a hearing before the Tribunal was adjourned. The Department was required to produce a further submission. It was further directed that the Appellant should disclose to both the Appeals Service and the Benefits Agency copies of further evidence on which he intended to rely.
26. In response to the Department's further submission (p.156), a further written submission, prepared by the Citizens Advice Bureau on the Claimant's behalf, was made on behalf of the Claimant (pp.130-155). Enclosed with that submission was a copy of a statutory declaration sworn by Ms V on 17 February 2003. This exhibited a copy of the 2001 Agreement. The body of the submission referred to these documents as "an affidavit and Contract which is the proof of the tontine [the Claimant] tried to explain as the reason he has no beneficial interest in the French property and confirms his version of the situation."
27. On 15 April 2003 the Department received a further submission from the Claimant (p.201)
28. At a hearing of the Tribunal on 26 August 2003 (p.265) the Claimant produced a copy of his French Will, and the hearing was eventually adjourned in order to enable the Claimant to obtain further evidence as to its effect.
29. The effective hearing by the Tribunal took place on 8 October 2003. The Claimant is recorded as having given evidence that

"I executed the handwritten tontine in the notaire's office on the day of signing up the conveyance. In addition to the tontine Ms V asked me to sign an English contract about the Property in February 2001. It was professionally drafted but in error the future as opposed to the past tense was used."

No copy of the 1999 Agreement was produced to the Tribunal.

30. As noted above, the Tribunal found that the 2001 Agreement "either relates to another property or is a fiction written up to try and defeat the capital and overpayment decision."
31. On 13 November 2003 the Claimant signed his OSSC 1 Form seeking leave to appeal to a Commissioner. His reasons for seeking leave included the following passage (p.323).

"Para. 7 of the Statement of Reasons [the chairman of the Tribunal] talks about alleged contract entered into on 1 February 2001 this was pinned to the statutory declaration which was drawn up by [Ms V] and her solicitor Roger Hart & Co and sworn before a solicitor ….. I never said that the solicitor had drawn up the contract what I did say was that [Ms V] had taken the contract to the solicitor when he did the Statutory Declaration.

The contract was drawn up by Ms V and on the back of the contract it states that it has to be read in conjunction with the agreement between Ms V and myself dated December 1999. I never got to show this agreement dated December 1999 as Mr Turrell brought the hearing to a close."

That was the first reference by either the Claimant or Ms V to the 1999 Agreement.

32. On 27 February 2004 Miss Commissioner Fellner granted leave to appeal and gave directions for the obtaining of evidence in relation to French law. Those directions did not refer to the 1999 Agreement, presumably because, although it had been mentioned in the grounds of appeal to a Commissioner, no copy of it had been produced to the Tribunal or Misss Fellner.
33. On 2 June 2004 the Secretary of State made his written submissions in the appeals, annexing the opinion of Mr. Croft in relation to the issues of French law which Miss Fellner had required to be answered. That opinion of course made no reference to the 1999 Agreement, because no copy of it had yet been produced by the Claimant.
34. On 22 June 2004 the Claimant made his submission in reply. He enclosed with that submission a copy of the 1999 Agreement.
35. As regards the 1999 Agreement, I adopt and indeed agree with the finding of Miss Fellner that it was a "put-up job". It was not produced until 22 June 2004, in connection with the appeal to Miss Fellner. I agree that it is inconceivable that it would not have been produced earlier if it had been signed in December 1999. If there had been a written agreement in the terms of the 1999 Agreement, it would in my judgment have been referred to by the Claimant when he was interviewed on 11 July 2002, and would have been referred to and produced by the Claimant with his schedule of evidence at p.86 and with the submission from his representative (beginning at p.130). The Claimant had been asked to produce evidence that he did not own the Property, and the 1999 Agreement would have been the obvious document to produce. Further, the reason given by the Claimant, when he first produced the 1999 Agreement in evidence, for the 2001 Agreement having been drawn up was not the same as that which now appears in his witness statement. At the time of adducing the 1999 Agreement in evidence he said (p.434) that the reason for the 2001 Agreement was that, as a result of reading a magazine article, Ms V considered that there should be a provision that the Claimant would sign any necessary documents if Ms V wished to sell the Property. In the witness statements of the Claimant and Ms V, on the other hand, it is said that the 2001 Agreement came about as a result of advice from a Macedonian lawyer that the 1999 Agreement should have been signed by Ms V and witnessed. I reach this conclusion (i.e. that the 1999 Agreement was not drawn up until some time after the interview on 11 July 2002) notwithstanding the evidence of the Macedonian lawyer, Antonio Kacarski, at p. 485.
36. I take account of the Claimant's point (p.434) that the 2001 Agreement was produced first because that was the latest one. However, I agree with the Tribunal's finding that if the 2001 Agreement, despite its reference to a property to be acquired in the future, was intended to refer to the Property, it also must have come into existence substantially later than its purported date. Again, if that document had been signed in February 2001, and was intended to apply to the Property, it would in my judgment have been referred to by the Claimant when he was interviewed on 11 July 2002, and would have been referred to in the letter from Ms V to the Department dated 26 July 2002
37. However, the Claimant and Ms V must, at some time before the Property was purchased, have discussed the question of buying the Property in the Claimant's name. I find that that it is probable that in those discussions the Claimant agreed, and therefore the Claimant and Ms V both understood, that 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.

The applicable law

(a) Introduction

38. The purchase of the Property in the Claimant's name with money provided by Ms V and under the common understanding which I referred to in the previous paragraph might well under English law give rise to a resulting or constructive trust in favour of Ms V. However, French law does not recognise the concept of a trust, and the first issue remitted by the Court of Appeal was as to the applicable law "governing the arrangement entered into between the Claimant and Ms V for the purchase of the Property."
39. Mr. Croally relies on what he says are two independent legal bases for his contention that the applicable law for the purpose of determining Ms V's rights as against the Claimant (and thus whether the Claimant is the beneficial owner of the Property) is English law.

(b) Webb v Webb

40. The first basis is founded on the case of Webb v Webb [1994] AB 696. In that case a flat in France was purchased in 1971 with funds provided by the plaintiff. The legal title was conveyed to the defendant, the plaintiff's son. Thereafter the flat was used as a holiday home by both the father and the son, the father paying the bulk of the outgoings. In 1990 the father brought proceedings for a declaration that the son held the property as trustee and for an order requiring him to execute the documents necessary to vest legal title in the father. The defendant took out a summons for an order that the action be summarily dismissed on the grounds that (1) the court had no jurisdiction to entertain the proceedings because under Article 16(1) of the Convention on Jurisdiction and the Enforcement of Judgments in Civil and Commercial Matters 1968, in proceedings with rights in rem in immovable property as their object exclusive jurisdiction was given to the courts of the contracting state in which the property was situated (2) the statement of claim disclosed no cause of action because the transfer of the property from the father to the son gave rise to the presumption of advancement.
41. On the first point Judge Baker Q.C. held that the Court did have jurisdiction because the plaintiff's action had as its object not a right in rem but the establishment of the accountability of the defendant as trustee for the plaintiff; and that, accordingly, article 16(1) of the Convention was inapplicable. The Judge said at [1991] 1 WLR 1410 at 1417H-1418H:

"The plaintiff in the present case does not rely on any contract for sale. He relies on a fiduciary relationship between him and the defendant who, he says, is his trustee. That is one of the foundations of equitable jurisdiction, and here again the main method of enforcement is an order in personam against the defendant. He can be required to execute the trust by transfers or rendering accounts. The relief claimed does not include any form of vesting order, or an order directing the rectification of some register of title, or even a declaration that the plaintiff is the legal owner of the property ............."

42. The conclusion which Mr. Croally seeks to draw from Webb v Webb is put as follows in his Skeleton Argument:

"In these circumstances, where Ms V would be entitled to such relief if the Claimant sought to renege on their agreement ......... , the Claimant cannot be regarded as the beneficial owner of the property. By virtue of his agreement with Ms V which is enforceable in the English courts according to English law, the Claimant is precluded from being the person entitled to direct the disposal of the property and to receive the proceeds of disposal of the property, i.e. he is not the beneficial owner of the property in the relevant sense."

43. I do not understand Mr. Croally to be contending that the Claimant could sue Ms V in contract (the proper law of the contract being English), rather than as a beneficiary under a resulting or constructive trust. If, however, such a contention were made, it would in my judgment fail. It cannot in my judgment be said that the matters to which the Claimant agreed were agreed in consideration of Ms. V having supplied the purchase money for the Property and having permitted it to be conveyed into the Claimant's name. It is apparent that Ms V regarded the Claimant as doing her a favour in permitting the Property to be conveyed into his name, rather than the other way round. (See the statement by Ms V in her witness statement that "the Claimant agreed to this arrangement, for which I am grateful to him." (para. 16 above)).
44. As regards a claim as beneficiary under a resulting or constructive trust, I agree with Mr. Maurici's submission that there was no decision in Webb v Webb as to the proper law of the trust. It appears simply to have been accepted by both parties that the proper law was English. Further, the facts are not on all fours with the present case because the purpose of the trust was different in that case. Its purpose appears to have been to avoid the Exchange Control Act 1947 ([1990] 1 WLR at 1419-20). I do not therefore consider that Webb v Webb is of any real assistance in determining the applicable law in the present case.

(c) The Recognition of Trusts Act, 1987

45. The Recognition of Trusts Act, 1987 implements the Hague Convention of 1986 on the law applicable to trusts and their recognition.
46. Article 7 of the Convention provides as follows:

"Where no applicable law has been chosen, a trust shall be governed by the law with which it is most closely connected.

In ascertaining the law with which a trust is most closely connected reference shall be made in particular to –

(a) the place of administration of the trust designated by the settlor;

(b) the situs of the assets of the trust

(c) the place of residence or business of the trustee;

(d) the objects of the trust and the places where they are to be fulfilled.

47. By Article 8 the law specified by Article 7 shall govern the validity of the trust, its construction, its effects, and the administration of the trust.

47. It is common ground the effect of Article 8 of the Convention in conjunction with s.1(2) of the 1987 Act is that a transaction which would give rise to a resulting trust or constructive trust under English law will be a valid trust under the Convention as extended by the 1987 Act if, on the choice of law rules in Article 7, English law is the applicable law of the trust.

48. The question is therefore whether the putative resulting or constructive trust in the present case is "most closely connected" with English or French law. Looking first at the four factors to which particular reference is required by Article 7 to be made, (a) is inapplicable because Ms V did not designate a place of administration of the trust. As to (b), the Property is of course in France. As to (c), the trustee's residence is in England. As to (d), there was some debate before me as to what the "objects of the trust" should be regarded as being. The object of the putative trust was in my judgment to ensure that Ms V retained the beneficial interest despite the fact that, in order to avoid the consequences which would have followed under French inheritance laws if the Property had been put into the Ms V's name, it was put into the Claimant's name. The putative trust was undoubtedly part of an arrangement which facilitated the avoidance of the consequences of the French inheritance laws. It can perhaps be said that the objects of the trust were to be fulfilled partly in England in that Ms V, the beneficiary, lives in England. However, in my judgment the greater part of the objects was to be fulfilled in France, given that the beneficial interest in question was in land situated in France and the inheritance laws in question were French.
49. Mr. Croally relies on the following additional factors (not specifically mentioned in Article 7) as indicating that the applicable law is English.
50. First, that the settlor/beneficiary and the trustee are domiciled in England so that they are amenable to the jurisdiction of the English courts.
51. Secondly, he submits that it is unlikely that the position as to the proper law before the coming into force of the 1987 Act was significantly different from the position under the 1987 Act, and that Webb v Webb demonstrates that the proper law before the 1987 Act was English law. I have already said that in my judgment Webb v Webb does not assist on the question of the proper law.
52. Thirdly, the money for the purchase of the property was raised by a loan in England and secured on English property. That is in my view a factor of very little, if any, significance.
53. Fourthly, he submits that "the agreement between [Ms V] and [the Claimant] was made in English and in terms which are easily interpreted in accordance with English trust law but probably difficult to interpret in accordance with French law. It is extremely unlikely that the parties to the transaction intended or wished that, in the event of any dispute between them, the matter should be litigated in France or in accordance with French law." That is a reference to the 1999 Agreement, which I have found not to be genuine. However, the discussions which I have found (see para. 36 above) are likely to have taken place between Ms V and the Claimant would of course have taken place in England and were in English. However, it does not seem to me to follow that the parties intended any dispute to be litigated in accordance with English law. On the contrary, it is strongly arguable that the parties assumed that any dispute would be litigated in accordance with French law. They certainly intended that, on the death of the Claimant, not only would the Property devolve in accordance with French inheritance law (as it must) but also that French law should apply for the purpose of determining whether the Claimant owned the Property at the time of his death. Further, it appears that the Claimant believed that the necessary protection for Ms V was provided by the French will. I refer to the passages from the interview on 11 July 2002 set out in paragraph 20 above. Further, in paragraph 6 of his witness statement he says:

"At the time of purchase I was advised by the French notaire that dealt with the purchase, to create a French Will. I was advised to do this in order to protect [Ms V's] interest. My understanding of the terms of this Will meant that half the property would be left to [Ms V] and the remaining half to Stephen. However, [Ms V] would be able to dealt with the entire property throughout her lifetime as she so wished, and would be entitled to any income arising from it. I did originally believe that the terms of the French Will ensured that [Ms V] would be the owner of the property despite me being the registered keeper. However, I am led to believe that the French Will did not actually provide for this eventuality."

54. To somewhat similar effect is the letter dated 26 July 2002 from [Ms V] to the Department, the relevant passage from which is set out in paragraph 21 above. However, unlike the Claimant's witness statement, that passage from Ms Vaughan' letter can be read as dealing only with the position after the Claimant's death, and as saying nothing about the position while the Claimant and Ms V are both still living. In her own witness statement (para. 2) Ms V said:

"I am also aware that [the Claimant] drew up a French Will in order to protect my interests. I am led to believe that [the Claimant] was advised by the French notaire that conducted my purchase to draw up this will, so that although the property would be in [the Claimant's] name, I would be entitled to the Property."

That statement appears to relate to the position during the Claimant's life, as well as after his death.

55. Finally, Mr Croally relies on the fact that if French law applied there would be no valid trust, and submits that the court should strain to avoid such a result. That view of the law is taken in Parker and Mellows, the Modern Law of Trusts, 8^th edition, at 858-9. However, I find more convincing the reasoning in Underhill and Hayton, the Law relating to Trusts and Trustees, 16^th ed, at pages 207-8:

"A related question is whether, in ascertaining the law of closest connection, any relevance should be attached to the fact that by X law the trust is valid, whereas by Y law it is not. Although not mentioned in the non-exhaustive list in Article 7, some commentators appear to suggest validity is a relevant matter. Moreover, it could be said that one of the "objects of the trust" is to create a valid trust in the first place. However, the better view is that no such presumption of validity exists. It is true that a settlor would probably not have chosen a law by which the trust was invalid. However, where there is no choice of law, the law of closest connection is a purely objective concept. A law of closest connection remains a law of closest connection regardless of whether it leads to the validity or invalidity of the trust."

56. In summary therefore, 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 substantially to be 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 number 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. In my judgment French law was therefore the applicable law of the putative trust. It follows that there was no resulting or constructive trust in favour of Ms V.

The position if English law were the applicable law

58. Mr. Croally submits that, if English law were the applicable law, the fact that the Claimant and Ms V had a common intention, arrived at in the course of discussions between them, that, during their joint lives, Ms V would be entitled to direct whether the Property should be sold and would be entitled to the proceeds of sale, would lead a Court to declare the existence of a constructive trust in favour of Ms V. He submits that there is no need for the terms of such trust to be any more complex than a simple trust in Ms. V's favour, because on the Claimant's death French succession law must necessarily apply, and the trust would in that event therefore in practice simply be overtaken by the application of French succession law. This was the second issue remitted by the Court of Appeal, and on my view as to the applicable law does not arise. I will, however, deal with it briefly.
59. It is in my judgment strongly arguable that the application of English law would not give rise to such a trust in the particular circumstances of this case. The special features of the case which arguably militate against a resulting or constructive trust are the following. First, the parties undoubtedly intended not only that (i) on the death of the Claimant (and possibly also the death of Ms V) French succession law would apply (as it necessarily must) but also (ii) that on the death of the Claimant he would be regarded as having been at the time of his death the owner of the Property for the purposes of French succession law. The policy of French succession law is that all children should be entitled to share in the estate of the deceased. What Ms V was seeking to achieve was that during at any rate the joint lives of herself and the Claimant she should have the powers of an absolute owner, and yet for the purposes of French succession law should be regarded as not having been the owner. It is in my judgment strongly arguable that a constructive trust would not be imposed by an English Court in those circumstances.
60. Secondly, at the time of the transfer of the Property into the Claimant's name the Claimant at least appears to have believed that the document which we now know to be merely a French Will "ensured that [Ms V] would be the owner of the Property despite me being the registered keeper." (paragraph 6 of his witness statement, set out at paragraph 53 above. It is arguable that an English Court would not declare the existence of a constructive trust in order to remedy what appears to have been a misunderstanding as to the effect of a document intended to take effect under French law.
61. Despite those reservations, on the whole I consider that, were English law the applicable law, a constructive trust in favour of Miss V would be imposed.

The Human Rights Act

62. Mr. Croally submits that (1) income support is a "possession" for the purposes of Article 1 of the First Schedule to the European Convention on Human Rights and (2) the fact that there would have been a resulting or constructive trust had the Property been situated in England constitutes discrimination contrary to Article 14 of the Convention. However, I accept the submission of Mr Maurici that there are at least two answers to that contention. First, it is now clear that discrimination must be on grounds of a "personal characteristic": R(S) v Chief Constable of the South Yorkshire Police [2004] 1 WLR 2196, para. 48; Carson v Secretary of State for Work and Pensions [2006] 1 AC 173 at paras. 13 (Lord Hoffmann), 54 (Lord Walker). The fact that the Property is in France rather than England is clearly not a "personal characteristic". Secondly, the fact that the Property is in France clearly constitutes justification for the result being different from what it would have been had the Property been in England.

Other remedies under French law

63. Mr Croally contends that the expert evidence which was provided by Mr Croft does not answer the question whether under French law Ms V would have other remedies (i.e. remedies other than a resulting or constructive trust) which would lead to the conclusion that the Claimant is not the beneficial owner of the Property. In particular, he submits that under French law Ms V might have remedies in contract, for example an injunction preventing sale and, if the Property were sold, an order requiring the proceeds of sale to be paid to her. He submits that since the provisions of French law are not within the Claimant's knowledge I should direct the Secretary of State, pursuant to his inquisitorial duty to ascertain the true position, to obtain additional evidence from an expert in French law. This is the third issue remitted by the Court of Appeal.
64. Mr Maurici contends that the burden lay on the Claimant to establish that there are other remedies under French law, and that in any event it follows from the advice already given by Mr. Croft that there are no other remedies which could result in the Claimant not being the beneficial owner for the purposes of determining the amount of his capital for income support purposes.
65. In his letter at p.374 Mr. Croft stated as follows in answer to the question "Would the English law doctrine of purchase in the name of another operate in relation to French real property?"

"Assuming that the doctrine of "purchase" referred to is that of ownership in equity or through a trust, this doctrine does not apply in relation to French real property as trusts are not recognised forms of ownership of land or anything else. Therefore, [the Claimant] is the full legal and beneficial owner of [the Property] by the simple fact that only his name is on the contract of sale and title deeds. The operation of constructive and resulting trusts and proprietary estoppel is unknown in French law. [The Claimant] is thus as far as the French authorities are concerned free to sell the property without seeking the consent of Ms V and is entitled to the proceeds."

66. As Mr. Maurici submitted, the last sentence of the passage from Mr. Croft which I set out above is an unequivocal statement that under French law the Claimant is free to sell the Property and to retain the proceeds. It is apparent, from Mr. Croft's reference to proprietary estoppel, that Mr. Croft considered not only the possibility of there being a resulting or constructive trust, but also any other relevant remedies which Ms V might have. That sentence is in my view inconsistent with there being, on the facts put before Mr. Croft, any remedy available to Ms V which would result in the Claimant not being the beneficial owner.
67. Mr Croft was provided with copies of (among other documents) the Acte de Vente dated 15 March 2000 by which the Property was transferred to the Claimant, of the French Will and of the 2001 Agreement. He was not provided with a copy of the 1999 Agreement, because it had not yet been produced by the Claimant. Further, although he was made aware that Ms V had provided the purchase money for the Property, he was not in terms informed (because no such case in those terms was being made on behalf of the Claimant at the time when Mr. Croft's advice was being sought) that (as I have found in para. 36 above), there was a common understanding, resulting from discussions between them, that Ms V would determine whether the Property was to be sold and that in the event of a sale she would be entitled to the proceeds. Notwithstanding that those discussions did not in my view result in an enforceable contract for the purposes of English law, it seems to me to be possible that they might give Ms V remedies under French law which ought to result in the Claimant not being considered the beneficial owner for English social security law purposes.
68. The opinion which was obtained from Mr. Croft was obtained by the Secretary of State at the direction of Miss Commissioner Fellner when granting leave to appeal to a Commissioner. Para. 22 of the Schedule to the Court of Appeal's Order setting aside her decision stated that to the extent that there is a need for further evidence on French law the obtaining of such evidence "shall be a matter left to the Commissioner to deal with by way of directions." On 19 December 2006 I directed that the Claimant was at liberty to submit further evidence in relation to the question whether, if French law were applicable, the Property should for some reason nonetheless not be treated as the Claimant's capital.
69. The response to that on behalf of the Claimant, in Mr Croally's written submission dated 30 March 2007, was that the Claimant is in receipt of limited public funding to allow him to be represented and that it was not clear whether public funding would be available to fund the instruction of an expert in French law. The submission stated that this would depend on the cost of such an opinion which the Appellant's representatives had to date been unable to ascertain because the expert approached had not been able to provide a fixed quotation.
70. Where a person has legal title to an asset, then the onus undoubtedly lies on him to produce some evidence indicating that he is not the beneficial owner. If he does not produce any such evidence, he will be treated as the beneficial owner: CIS/030/93 at para. 36. However, the Claimant has produced evidence which, under French law, which I have held to be the applicable law, might give rise to remedies for the Claimant which might be sufficient to prevent him being regarded as the owner of the Property for the purposes of the calculation of his capital. I am left with a feeling that, on the facts which I have found, there is a real gap in the evidence as to French law in this respect. It seems to me that Kerr v Department for Social Development [2004] 1 WLR 1372 is authority for the proposition that the burden of proof should only be resorted to in social security cases if the facts cannot be determined after the claimant and the Secretary of State have each done all that they reasonably could to discover them. Baroness Hale said:

"62. What emerges from all this is a co-operative process of investigation in which both the claimant and the department play their part. The department is the one which knows what questions it needs to ask and what information it needs to have in order to determine whether the conditions of entitlement have been met. The claimant is the one who generally speaking can and must supply that information. But where the information is available to the department rather than the claimant, then the department must take the necessary steps to enable it to be traced.

63. If that sensible approach is taken, it will rarely be necessary to resort to concepts taken from adversarial litigation such as the burden of proof. The first question will be whether each partner in the process has played their part. If there is still ignorance about a relevant matter then generally speaking it should be determined against the one who has not done all they reasonably could to discover it. As Mr Commissioner Henty put it in CIS/5321/1998: "a claimant must to the best of his or her ability give such information to the AO as he reasonably can, in default of which a contrary inference can always be drawn." The same should apply to information which the department can reasonably be expected to discover for itself."

71. Evidence as to French law is evidence which the Department can discover for itself. Is it, however, reasonable in all the circumstances to require the Department now to obtain further advice on French law? I have come to the conclusion, on balance, that it is. I consider that that further advice should be obtained from Mr Croft. I do not accept Mr. Croally's submissions that he is not suitably qualified or that his existing advice was lacking in competence.
72. It follows that this decision can only be in the nature of an interim decision of these appeals. The final decision must await the further advice from Mr. Croft. I give the following directions in relation to the further conduct of the appeals.

DIRECTIONS

(1) The Secretary of State shall within one month from the date of issue of this decision submit to the Claimant's solicitors for approval a draft letter instructing Mr. K.J. Croft of Messrs Riddell Croft & Co to give further advice in relation to the question whether, on the facts found in this decision (and in particular the common understanding referred to in para. 36 above), any and if so what remedies would have been available to Ms V in the event of the Claimant seeking to sell the Property and to treat the proceeds of sale as his own. When the terms of the draft letter have been agreed the Secretary of State shall instruct Mr. Croft to advise accordingly.

(2) The Claimant shall within one month of receipt of Mr. Croft's further advice send to this Office written submissions on the issue whether such (if any) remedies as may have been available to Ms V under French law lead to the conclusion that the Property was not his capital for income support purposes.

(3) The Secretary of State shall, within one month of being sent the Claimant's further submissions by this Office, make a written submission on the same issue.

(signed on the original) Charles Turnbull

Commissioner

18 September 2007