[1995] UKSSCSC CIS_461_1994 (13 October 1995)

Factual and Procedural Background

This opinion concerns an appeal by the Claimant against a decision of a Social Security Appeal Tribunal (SSAT) dated 2 October 1990. The Claimant had applied for income support on 21 February 1990, which was refused on the basis that his capital exceeded the prescribed limit. At that time, the Claimant had savings of £5,600 and owned two houses: one he lived in and another occupied by his estranged wife. The Claimant only became aware in 1993 of the concept of a reversionary interest, which, if applicable to his interest in the other house, would mean it should be disregarded for capital calculation under paragraph 5 of Schedule 10 of the Income Support (General) Regulations. The Commissioner granted leave to appeal out of time on 25 July 1994. The Department had destroyed the original file after two years, but a reconstituted file was sufficient for determination. An oral hearing was held on 12 September 1995, with the Claimant appearing in person and the Department represented by Attorney Rabas.

The Claimant, aged 78 or 79, married in 1941 and purchased the house which became the matrimonial home. The marriage became estranged around 1968, after which the Claimant moved to another house he owned, leaving the estranged wife in occupation of the original house. There was no written agreement, but it was understood that the wife would live there for the rest of her life. The Claimant never returned to occupy the house and received no income or benefit from it since 1968. The marriage was Roman Catholic and divorce was never considered. The Claimant asserted that the wife’s occupation constituted an encumbrance on his property.

Legal Issues Presented

1. Whether the Claimant’s interest in the house occupied by his estranged wife constitutes a "reversionary interest" for the purposes of paragraph 5 of Schedule 10 of the Income Support (General) Regulations.
2. If the wife’s interest is as a licensee under an irrevocable and non-assignable licence, whether such an interest qualifies as a reversionary interest under the said regulations.

Arguments of the Parties

Appellant's Arguments

• The Claimant contended that his estranged wife had a life interest in the house by mutual agreement, allowing her to occupy it for life after their separation.
• He argued that this interest meant his own interest was a reversionary one, which should be disregarded for capital assessment in income support calculations.
• The Claimant emphasized that there was no divorce or property division, and that the wife’s occupation deprived him of any income or enjoyment from the property.

Respondent's Arguments

• The adjudication officer initially supported the appeal only partially, suggesting remittance for rehearing and not accepting the Claimant’s interest as reversionary under paragraph 5 of Schedule 10.
• The officer proposed that the wife’s occupation was protected by sections 1 and 2 of the Matrimonial Homes Act 1983, potentially reducing the value of the Claimant’s interest.
• However, the officer cautioned against adopting assumptions about the wife’s claim without formal establishment, noting the tribunal’s speculative valuation.
• Attorney Rabas later advanced legal authorities supporting the imposition of a constructive trust arising from an irrevocable licence, which could elevate the wife’s interest to that of a tenant for life under the Settled Land Act 1925.
• She conceded that if the wife’s interest was a life tenancy, the Claimant’s interest would be reversionary for the purposes of the regulations.

Table of Precedents Cited

Court's Reasoning and Analysis

The court analysed the nature of the Claimant’s interest in the house occupied by his estranged wife, focusing on whether it constituted a reversionary interest under paragraph 5, Schedule 10 of the Income Support (General) Regulations. The evidence established a mutual agreement that the wife could occupy the house for life following their separation, with no written agreement but clear intention. The court considered relevant authorities on irrevocable licences and constructive trusts, concluding that the wife’s occupation gave rise to a constructive trust, thereby elevating her interest to that of a tenant for life under the Settled Land Act 1925.

The court applied the test from Ashburn Anstalt v. Arnold, requiring that the owner’s conscience be affected to impose a constructive trust, and found this test met based on the facts. This meant the Claimant’s interest was the future interest or reversion, which did not afford any present enjoyment and thus qualified as a reversionary interest for the regulations.

The court rejected speculative valuations of the wife’s interest without formal claims and noted that the existence of a life tenancy effectively removed the wife’s occupation from the Claimant’s capital assessment. The court also referenced prior decisions on similar interests, concluding that those cases did not materially affect the determination here.

Holding and Implications

The appeal is allowed. The court held that the Claimant’s interest in the house is a reversionary interest for the purposes of paragraph 5, Schedule 10 of the Income Support (General) Regulations. Consequently, this interest is to be disregarded when calculating the Claimant’s capital for income support eligibility.

The direct effect is that the Claimant’s capital falls below the prescribed limit, entitling him to income support. No new legal precedent was established beyond the application of existing principles regarding constructive trusts and reversionary interests in this context.