Law Report: Gift failed because condition was not met

LAW REPORT v 14 May 1997

Ellis v The Chief Adjudication Officer; Court of Appeal (Lord Justice Staughton, Lord Justice Otton and Lord Justice Schiemann) 8 May 1997

Where a property was transferred by deed of gift on condition that the transferee would care for the transferor in the property, the condition was not void for uncertainty. Since, however, the condition was not fulfilled, the gift failed and the transferee held the property on trust for the transferor, who was consequently not eligible for income support.

The Court of Appeal upheld the decision of a Social Security Commissioner rejecting the appellant's claim for income support.

The appellant transferred her flat to her daughter by a deed of gift, on condition that her daughter would look after her in the flat, and pay off the mortgage. The daughter was registered as owner of the property and duly paid off the mortgage, but evicted the appellant from the flat.

The appellant's claim for income support was rejected by an adjudication officer. Her appeals to the Appeal Tribunal and the Social Security Commissioner were dismissed.

Lorna Findlay (Ward & Griffiths, Nottingham) for the appellant; Timothy Mould (Solicitor, Department of Social Security) for the Chief Adjudication Officer.

Lord Justice Staughton said that the commissioner had found that the transfer of the property was a gift subject to a condition subsequent, namely that the appellant's daughter would look after her in the flat. That condition had not been fulfilled and the gift had, consequently, failed, so that the daughter held the property on trust for the appellant.

He had found, accordingly, that the appellant was not entitled to income support, since her capital exceeded the amount prescribed by regulation 45 of the Income Support (General) Regulations 1987 as amended.

The question arose whether the condition that the appellant's daughter care for her in the flat was void for uncertainty. If it were, it would promote the appellant's claim for income support, but it would also follow that she would be unable to recover the proceeds of sale of the flat from her daughter.

The wider implications of such a decision were a cause of great concern. There must be many elderly parents who parted with their property to their children on assurances such as that given to the appellant.

In his Lordship's judgment the condition could fairly be construed as requiring the daughter to allow the appellant to live in the flat for as long as it was reasonably practicable for her to do so, and to see that she was provided, for payment if required, with the basic necessities of life. Such a term had sufficient certainty to ensure that it was valid and effective.

It was then necessary to decide the value of the flat. There was a dispute as to what was required to be valued by regulation 49 of the amended Regulations with regard to the cost of realising the appellant's beneficial interest. Was it the flat, or the beneficial interest in the flat in the appellant's hands? If the latter view were correct, it was said that the court would have to envisage the appellant going to an estate agent and offering her, presumably disputed, beneficial interest for sale. Would anyone buy it all, or for at least pounds 6,000?

It was doubtful whether so complicated a calculation was required by the regulation.

The right course was to make some deduction for the costs likely to be incurred in realising the asset. That was what the commissioner had done in the present case. He had concluded that there would in any event remain more than pounds 6,000, which was the relevant capital limit under regulation 45 at the time. That was a conclusion of fact with which the court could not interfere.

Kate O'Hanlon, Barrister